Business insurance on premises, stock and equipment
Deductible
Premiums to insure business assets, stock and premises are fully deductible.
You can claim this · Sole proprietor or freelancer
Short term insurance on assets used in the trade is a normal operating expense. The important consequence is on the other side: when you claim, the payout is generally taxable to the extent it replaces trading stock or deductible expenditure, and where it relates to a capital asset it goes into the capital gains calculation, possibly with an involuntary disposal rollover if you replace the asset.
Where people go wrong
Deducting the premium every year and then not declaring the payout in the year of a claim. The insurer's payment is traceable and the mismatch is easy to spot. Also watch for the recoupment when insured equipment that you claimed wear and tear on is written off and replaced.
Does buying it save you tax?
Yes, deductible and genuinely necessary. Under insurance is the bigger risk, because average clauses cut your payout proportionally when you are under insured.
Authority s11(a)
governed by General deduction for expenditure in producing income
may unlock Recoupment when an asset is sold
Insurance
Research, not advice.
This has not yet been checked against the Act or a SARS guide, so treat it as a starting
point and a question for your practitioner, not a claim you can make.
Business interruption insurance premium
Deductible
Covers lost income after an insured event; the premium is deductible, and any payout received is taxable income.
You can claim this · Sole proprietor or freelancer
Mirrors the ordinary treatment of insurance premiums already in the catalogue: premium deductible, payout taxable.
Where people go wrong
Forgetting to declare a payout as income because it feels like compensation rather than earnings.
Does buying it save you tax?
Worth having for a business with real exposure to a shutdown event; the payout being taxable does not reduce its value.
Authority s11(a)
governed by General deduction for expenditure in producing income
Insurance
Research, not advice.
This has not yet been checked against the Act or a SARS guide, so treat it as a starting
point and a question for your practitioner, not a claim you can make.
Credit life insurance on a bond or loan
Depends
Credit life on your own home is a private cost with no deduction, but on a bond over a rental property it is arguably a cost of the rental trade.
The answer turns on the facts · Landlord
On a primary residence there is no trade and no deduction. Where the bond is over a property you let, and the credit life cover is a requirement of the loan producing the rental income, there is a reasonable argument that the premium is deductible along with the bond interest. Take advice, and be clear that the bond capital repayment is never deductible in any case.
Where people go wrong
Bundling the whole bond instalment into rental expenses. Only the interest portion is deductible, never the capital. The insurance premium is a separate line and must be argued separately. Get the annual bond statement that splits interest from capital.
Does buying it save you tax?
Marginal either way. The bigger money is in checking that the credit life premium on the bond is competitive, because banks often sell it at well above market and you are usually entitled to substitute your own policy.
Authority s11(a)
governed by Rental running expenses are deductible
governed by Bond interest, not the bond instalment
Insurance
Research, not advice.
This has not yet been checked against the Act or a SARS guide, so treat it as a starting
point and a question for your practitioner, not a claim you can make.
Credit life insurance premium on vehicle finance, a personal loan, or a business loan that is not a rental bond
Not deductible
Credit life insurance is not deductible as a general default, whether the underlying loan is business or personal, because the ordinary deduction formula does not reach a life-type premium. PLEASE CONFIRM WITH YOUR TAX PRACTITIONER: this item is matched to an existing rule by general principle, not a SARS ruling written for this exact situation, so check it applies before relying on it.
There is no relief for this · Sole proprietor or freelancer
This is the general-case counterpart to EX-LEG-056 (credit life on a rental-property bond, where there is a reasonable argument for deductibility). Outside that specific rental case, the reasoning follows key-person insurance: s11(a) read with s23(a) and s23(g) requires expenditure actually incurred in the production of income and not private or capital in nature, and a life-type premium generally fails that test. Parliament had to write s11(w) as a narrow, opt-in gateway to make key-person premiums deductible at all, which shows the ordinary formula does not get there on its own. Credit life on vehicle finance or an ordinary loan does not meet s11(w)'s conditions either, since it does not insure an employee or director for the employer's benefit, so it has no equivalent gateway. Whether the underlying loan is business or personal affects the deductibility of the INTEREST, not the premium: the objection to the premium is its capital/life-cover nature, not privateness.
Where people go wrong
Assuming that because the loan is a genuine business loan (e.g. vehicle finance for a delivery vehicle), the credit life sold alongside it is automatically deductible too. The interest and the premium are two different characters of expense and must be assessed separately.
Does buying it save you tax?
Not applicable, this is a not_deductible item. Worth checking whether the credit life premium is competitively priced and whether your own policy can be substituted, since banks often price it well above market and the National Credit Act gives a right of substitution.
Authority s11(a) read with s23(a) and s23(g); s11(w) cited as the comparator showing why a specific gateway is needed and credit life on an ordinary loan does not have one
excluded by General deduction for expenditure in producing income
Insurance
Research, not advice.
This has not yet been checked against the Act or a SARS guide, so treat it as a starting
point and a question for your practitioner, not a claim you can make.
Cyber insurance premium (business)
Deductible
A straightforward deductible premium alongside professional indemnity and public liability already listed in the catalogue.
You can claim this · Sole proprietor or freelancer
Ordinary deductible business insurance premium.
Where people go wrong
None specific.
Does buying it save you tax?
Worth having and worth claiming.
Authority s11(a)
governed by General deduction for expenditure in producing income
Insurance
Research, not advice.
This has not yet been checked against the Act or a SARS guide, so treat it as a starting
point and a question for your practitioner, not a claim you can make.
Directors and officers (D&O) insurance
Deductible
A deductible premium protecting decision-makers, distinct from professional indemnity insurance already in the catalogue.
You can claim this · Company
Paid by the company to protect its own directors and officers.
Where people go wrong
None specific.
Does buying it save you tax?
Worth it for any company with active, exposed decision-makers.
Authority s11(a)
governed by General deduction for expenditure in producing income
Insurance
Research, not advice.
This has not yet been checked against the Act or a SARS guide, so treat it as a starting
point and a question for your practitioner, not a claim you can make.
Funeral cover premium
Not deductible
Funeral cover premiums are private expenditure with no tax deduction, and the payout is not taxable.
There is no relief for this · Anyone
No provision allows a deduction and the general deduction fails on the trade requirement. The payout is not income tax in the hands of the recipient. Burial society contributions are in exactly the same position as a formal funeral policy premium.
Where people go wrong
Holding several small funeral policies on the same lives, often sold door to door, and paying more in total premiums than the combined cover is worth. There is no tax angle to recover any of it.
Does buying it save you tax?
No relief. Consolidate duplicate policies and check what the total monthly premium actually buys, because layered funeral cover is one of the most oversold products in the market.
Authority s23(a)
excluded by Salaried employees cannot deduct ordinary work costs
Insurance
Research, not advice.
This has not yet been checked against the Act or a SARS guide, so treat it as a starting
point and a question for your practitioner, not a claim you can make.
Goods in transit insurance
Deductible
Goods in transit premiums are a deductible cost of moving your trading stock.
You can claim this · Sole proprietor or freelancer
Straightforward revenue expenditure connected to the movement of trading stock. Where a claim is paid out for lost or damaged stock, the payout is taxable trading income, matching the deduction you already took for the stock.
Where people go wrong
Relying on a courier's standard liability, which is usually capped at a very low amount per parcel and excludes a long list of goods. The premium is deductible, an uninsured hijacked load is not something a deduction can fix.
Does buying it save you tax?
Deductible and inexpensive relative to a single lost load. Check the exclusions, particularly for electronics and unattended vehicles.
Authority s11(a)
governed by General deduction for expenditure in producing income
may unlock Recoupment when an asset is sold
Insurance
Research, not advice.
This has not yet been checked against the Act or a SARS guide, so treat it as a starting
point and a question for your practitioner, not a claim you can make.
Income protection policy premium
Not deductible
Income protection premiums are no longer deductible, and in exchange the benefit you receive is not taxed.
There is no relief for this · Salaried employee
The deduction that used to be available for these premiums was removed, and the corresponding change made qualifying benefits exempt. So you pay the premium out of after tax money and receive the benefit tax free, rather than the other way round. Employer paid income protection contributions are treated as a taxable fringe benefit on the same logic.
Where people go wrong
Old advice and old policy documents still refer to the deduction, and people keep entering these premiums on their returns. It is disallowed. The related trap is under insuring: because the benefit is now tax free, you need less cover than a gross salary replacement figure suggests, and many people are paying for more than they need.
Does buying it save you tax?
Genuinely worth having, but not for tax reasons. Because the payout is tax free, size the cover against your net income rather than your gross, which usually means a lower premium than you were quoted.
excluded by Salaried employees cannot deduct ordinary work costs
Insurance
Research, not advice.
This has not yet been checked against the Act or a SARS guide, so treat it as a starting
point and a question for your practitioner, not a claim you can make.
Key man insurance premium
Depends
Key man premiums are deductible only if the policy meets a strict set of conditions, and if the premium is deductible the payout is taxable.
The answer turns on the facts · Company
There is a specific provision allowing the deduction, but it requires among other things that the policy is taken out on the life of an employee or director, that the taxpayer is the policyholder, that it is for the purpose of covering a loss from death, disablement or severe illness, and that the policy agreement states that the provision applies. Miss a condition and the premium is not deductible. The trade off is symmetrical: where the premium was deductible the proceeds are taxable, and where it was not the proceeds are generally not.
Where people go wrong
The policy document must be worded to comply. A policy sold as key man cover that does not contain the required statement fails, and the failure is only discovered years later. Ask the insurer in writing whether the policy meets the section's requirements before you claim a single premium.
Does buying it save you tax?
This is one where the tax outcome should genuinely drive the structure. A non deductible premium with a tax free payout is often better for a small company than a deductible premium with a fully taxable payout. Model both before choosing.
Authority s11(w)
governed by General deduction for expenditure in producing income
Insurance
Research, not advice.
This has not yet been checked against the Act or a SARS guide, so treat it as a starting
point and a question for your practitioner, not a claim you can make.
Life cover premium on a personal policy
Not deductible
Personal life cover premiums are not deductible, and the proceeds paid to your beneficiaries are not income tax.
There is no relief for this · Anyone
There is no deduction for a personal life policy. The proceeds are not taxable income in the beneficiary's hands. Estate duty is a separate question: proceeds of a policy on your own life are often deemed property in your estate for estate duty, with exceptions for certain policies such as buy and sell policies that meet the requirements.
Where people go wrong
Assuming a life policy is estate duty free because it pays outside the estate to a named beneficiary. Paying outside the estate for administration purposes does not mean it escapes estate duty. Check the deemed property rules, especially on policies not covered by an exemption.
Does buying it save you tax?
No income tax relief. Buy the cover you need for your dependants, and check with a properly qualified adviser whether the policy is structured to avoid unnecessary estate duty.
governed by Estate duty abatement and portability
Insurance
Research, not advice.
This has not yet been checked against the Act or a SARS guide, so treat it as a starting
point and a question for your practitioner, not a claim you can make.
Medical gap cover premium
Not deductible
Gap cover premiums do not qualify for the medical scheme fees tax credit and are not deductible, because gap cover is short term insurance, not a medical scheme.
There is no relief for this · Anyone
The medical scheme fees tax credit is available only for contributions to a registered medical scheme. Gap cover is an insurance product regulated separately, so the premium gets no credit and no deduction. What the gap policy actually pays out to the hospital or specialist may however reduce the out of pocket medical expenses you can claim under the additional medical expenses credit, because you only claim amounts you were not reimbursed for.
Where people go wrong
Adding gap cover premiums to your medical scheme contributions on the return. It inflates the credit, it is a specific and easily detected error, and it is one of the most common medical mistakes on an ITR12. The medical tax certificate from the scheme is the correct figure, not your bank statement total.
Does buying it save you tax?
Useful cover if your specialists charge above scheme rates, but no tax benefit at all. Do not let a broker suggest otherwise.
Authority s6A
excluded by Medical scheme fees tax credit
governed by Amounts not recovered from the scheme
Insurance
Research, not advice.
This has not yet been checked against the Act or a SARS guide, so treat it as a starting
point and a question for your practitioner, not a claim you can make.
Professional indemnity insurance
Deductible
Professional indemnity premiums are deductible for anyone trading for their own account, and are often compulsory for the profession.
You can claim this · Sole proprietor or freelancer
For a sole practitioner, consultant or professional firm this is a direct cost of practising and is deductible. For a salaried employee whose employer requires cover but does not pay for it, the employee deduction rules are restrictive and the practical answer is usually no, so it is far better for the employer to carry the policy.
Where people go wrong
Cancelling the policy when you retire or change careers. Professional indemnity is normally written on a claims made basis, meaning a claim brought after you cancel is not covered even if the work was done while insured. Run off cover is the answer, and its premium is deductible only while you still carry on the trade.
Does buying it save you tax?
Deductible and often a condition of your professional registration. The run off point is the one most people miss and it matters more than the deduction.
Authority s11(a)
excluded by Salaried employees cannot deduct ordinary work costs
governed by General deduction for expenditure in producing income
Insurance
Research, not advice.
This has not yet been checked against the Act or a SARS guide, so treat it as a starting
point and a question for your practitioner, not a claim you can make.
Professional indemnity run-off cover after closing a practice
Deductible
Cover bought to protect against claims arising after a practice has closed is still a deductible cost of that trade.
You can claim this · Sole proprietor or freelancer
The deduction is claimed against the final years of trading income even though the practice itself has ended.
Where people go wrong
Assuming a cost incurred after closing the practice cannot be deducted at all.
Does buying it save you tax?
Worth paying for and worth claiming, since the exposure it covers arose from the trade while it was operating.
Authority s11(a)
governed by General deduction for expenditure in producing income
Insurance
Research, not advice.
This has not yet been checked against the Act or a SARS guide, so treat it as a starting
point and a question for your practitioner, not a claim you can make.
Public liability insurance
Deductible
Public liability premiums are deductible business expenses.
You can claim this · Sole proprietor or freelancer
The cover exists because your trade creates a risk of injury or damage to third parties, which is a risk inseparable from carrying on that trade, so the premium is deductible. Note the interaction with damages: where the insurer pays the claim you have no deduction and no cost, and where you pay an excess that excess follows the deductibility of the underlying damages.
Where people go wrong
Assuming public liability covers professional mistakes. It generally does not. Advice and service errors need professional indemnity cover, and businesses discover the gap at exactly the wrong moment.
Does buying it save you tax?
Deductible and cheap relative to a single serious claim. This is one of the few insurance items where the honest answer is buy more than you think you need.
Authority s11(a)
governed by General deduction for expenditure in producing income
Insurance
Research, not advice.
This has not yet been checked against the Act or a SARS guide, so treat it as a starting
point and a question for your practitioner, not a claim you can make.
SASRIA cover
Depends
SASRIA premiums on business or rental assets are deductible, on a private home or car they are not.
The answer turns on the facts · Sole proprietor or freelancer
SASRIA is added to your underlying short term policy and follows the same treatment as that policy. On business premises, stock, plant or a let property it is deductible. On your private home and personal vehicle it is private expenditure. Where an asset is used partly for business, apportion on the same basis as the rest of the policy.
Where people go wrong
SASRIA cover has limits per policy, and businesses that have grown are often carrying cover set years ago. The deduction is a rounding error next to being under covered for a riot or looting loss, which is exactly the risk SASRIA exists for.
Does buying it save you tax?
Deductible on business assets and very cheap relative to the risk in South Africa. Check the sum insured against current replacement values rather than the number you first insured for.
Authority s11(a)
governed by General deduction for expenditure in producing income
governed by Rental running expenses are deductible
Insurance
Research, not advice.
This has not yet been checked against the Act or a SARS guide, so treat it as a starting
point and a question for your practitioner, not a claim you can make.
