A loan to a relative that is never repaid
Not deductible
A private loan that goes bad is almost never deductible, and the capital loss is usually disregarded because the borrower is a connected person.
There is no relief for this · Anyone
The bad debt deduction in the Income Tax Act is only available where the amount was previously included in your income, which is true of a trade debtor but not of money you lent out of your after tax savings. On the capital gains side a loss on a debt owed by a connected person is generally disregarded, so it does not shelter other gains either. The practical outcome is that the money is simply gone for tax purposes.
Where people go wrong
Trying to claim it as a bad debt because the word debt appears. The deduction is a business provision. Worse, if there was never a real repayment expectation SARS can recharacterise the original payment as a donation and raise donations tax on it years later.
Does buying it save you tax?
No. There is no relief for lending money to family and not getting it back, so lend only what you can afford to lose and paper it properly if you want any chance of arguing it was a loan.
Authority s11(i)
excluded by Bad and doubtful debts
excluded by Capital losses carry forward indefinitely
governed by Donations tax on gifts
Lending and finance
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.
ATM cash withdrawal fee
Depends
An ATM withdrawal fee follows what the cash was for, exactly like the withdrawal itself: business cash is deductible, personal cash is not, and a bank statement cannot tell you which. 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.
The answer turns on the facts · Sole proprietor or freelancer
The fee is incidental to the withdrawal, so it takes the same character as the withdrawal it belongs to under s11(a). Cash drawn to pay a casual worker or buy stock at a cash-only supplier is business expenditure and the fee follows it. Cash drawn for personal spending is not, and neither is its fee.
Where people go wrong
A blanket rule claiming every ATM fee, or claiming none, is wrong in both directions. The fee cannot be assessed without knowing what the cash itself was for, which the bank line never states.
Does buying it save you tax?
Individually trivial, R5 to R12 a time, but frequent cash withdrawals compound over a year. Worth tracking only if cash is a genuine part of how the business pays for things.
Authority s11(a)
governed by General deduction for expenditure in producing income
Lending and finance
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.
Bad debt written off in a business
Deductible
You can deduct a trade debt you have actually written off, but only if that amount was already included in your income.
You can claim this · Sole proprietor or freelancer
The deduction requires three things: the amount was included in your income in this or an earlier year, the debt has become bad, and you have actually written it off in your books during the year. That means it works for an invoice you raised and declared, and it does not work for a loan you made out of savings or for income you never recognised. If you are on a cash basis and never declared the invoice, there is nothing to write off. Registered VAT vendors should also claim the VAT bad debt relief on the output tax already declared, which is a separate calculation.
Where people go wrong
Writing it off in the accounts but not until after year end, or writing off a debt that is merely late rather than bad. You need evidence you pursued it, such as letters of demand, a liquidation notice or a decision to stop trading with the customer. A debt written off and then later recovered must be brought back into income.
Does buying it save you tax?
It is not a benefit, it is damage limitation. You are recovering only your marginal rate on money you already lost. The VAT relief is often the bigger recovery of the two for a vendor.
Authority s11(i)
governed by Bad and doubtful debts
may unlock Recoupment when an asset is sold
may unlock Bad debt relief for VAT
Lending and finance
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.
Bank charges on a business account
Deductible
Bank charges on an account used for the business are fully deductible, including card machine and merchant fees.
You can claim this · Sole proprietor or freelancer
Account fees, transaction fees, cash deposit fees, card machine rental and merchant service charges are all ordinary costs of running a trade. Bank charges usually carry VAT, so a registered vendor should also be claiming the input tax on the tax invoice the bank issues, not just the income tax deduction. If a single account is used for both business and personal transactions, only the business portion is deductible.
Where people go wrong
Running the business through a personal account and then claiming all the bank charges. SARS will ask for a bank statement, and the personal transactions on it are what disallows the claim. A separate business account costs a little more in fees and saves far more in audit pain.
Does buying it save you tax?
Yes, in the sense that it is a genuine cost you are already paying and it reduces taxable income. It is not a reason to choose a more expensive account.
Authority s11(a)
governed by General deduction for expenditure in producing income
may unlock Input tax on capital goods
Lending and finance
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.
Bank charges on a personal account
Not deductible
Bank charges on your personal account are private expenditure and cannot be deducted, even against the interest that account earns.
There is no relief for this · Salaried employee
Private banking costs fall squarely inside the prohibition on deducting private expenditure. They also cannot be netted against your local interest income, because expenses incurred to produce exempt or investment interest are generally not deductible for an individual who is not carrying on a trade of investing.
Where people go wrong
Deducting bank charges from interest earned before declaring it. Declare the gross interest as it appears on your IT3(b). SARS matches that figure directly.
Does buying it save you tax?
No. There is nothing to claim.
Authority s23(a)
excluded by Salaried employees cannot deduct ordinary work costs
excluded by Investment fees are generally not deductible against interest
Lending and finance
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.
Bond interest on a rental property
Deductible
Deduct the interest portion of the bond, never the full bond instalment, against your rental income.
You can claim this · Landlord
The interest on a loan used to acquire an income producing property is deductible against the rental income. The capital repayment is not, and neither is the original purchase price. Get the annual interest certificate from the bank rather than adding up instalments. If the property is let for only part of the year, or only part of it is let, the interest is apportioned accordingly, and a genuinely vacant period between tenants does not usually break the deduction.
Where people go wrong
Claiming the full instalment, and claiming interest on a bond that was later re-advanced for something else. If you drew extra against the property to buy a car, the interest on that portion is not deductible even though the bond is registered over the rental property.
Does buying it save you tax?
Yes, it is the single largest deduction most landlords have. But it reduces tax, it does not make a negatively geared property profitable, and losses on a rental can be ring fenced if the letting looks like a suspect trade.
Authority s11(a)
excluded by Ring fencing of an assessed loss from a suspect trade
governed by Bond interest, not the bond instalment
governed by Apportionment for part of a property or part of a year
Lending and finance
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.
Bond interest on the home you live in
Not deductible
Interest on the bond over the home you live in is not deductible, and it does not add to your base cost either.
There is no relief for this · Salaried employee
South Africa has no general mortgage interest deduction for a private residence. The only routes to any relief are the portion attributable to a qualifying home office, or the portion attributable to a part of the home that is genuinely let out, and both require you to meet the strict home office or rental requirements first. Bond interest is also a financing cost, so it does not form part of the base cost of the property for capital gains purposes.
Where people go wrong
Claiming a share of bond interest as home office cost without meeting the home office requirements, which for an employee include a room used regularly and exclusively for work and, for most employees, an employer requirement to work from home. Claiming a home office portion also chips away at the primary residence exclusion when you eventually sell.
Does buying it save you tax?
No. And before claiming a home office share, weigh the annual saving against the capital gains exclusion you give up on that portion of the house.
Authority s23(b)
excluded by Home partly used for trade reduces the exclusion
excluded by Salaried employees cannot deduct ordinary work costs
may unlock Home office expenditure
Lending and finance
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.
Bond registration and initiation costs on buying a property
Not deductible
Bond registration costs are financing costs, so they are not deductible now and generally do not count towards your base cost either.
There is no relief for this · Landlord
Transfer costs, transfer duty and conveyancing fees on the transfer itself typically go into the base cost of the property for capital gains. Bond registration and bond initiation costs relate to the loan rather than to acquiring the property, and they sit in a different category, so do not assume they can be lumped in with the transfer costs. Keep every invoice from the conveyancer, itemised, because the split between transfer costs and bond costs is exactly what determines the answer.
Where people go wrong
Throwing the whole conveyancer's statement into base cost when you eventually sell. The transfer side and the bond side are treated differently, and an inflated base cost that cannot be supported line by line invites an adjustment plus understatement penalties.
Does buying it save you tax?
No relief at the time. The reason to keep the paperwork is capital gains tax many years later, when nobody can find it.
Authority Eighth Schedule para 20
governed by Base cost includes far more than the purchase price
governed by Transfer duty and bond costs are not deductible now
Lending and finance
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.
Cash withdrawal or handling fee, over the counter or at a till point
Depends
Same rule as an ATM fee: the fee takes the character of the cash it was drawn for. 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.
The answer turns on the facts · Sole proprietor or freelancer
Covers branch counter withdrawals and till-point cash-back fees, which carry a different bank descriptor from an ATM withdrawal but the identical tax question. See EX-FIN-037.
Where people go wrong
A till cash-back line reads as a purchase at the retailer on a naive matcher. It is a cash withdrawal, not spend at that retailer, and must be split out before any merchant-based categorisation runs.
Does buying it save you tax?
Same as EX-FIN-037.
Authority s11(a)
governed by General deduction for expenditure in producing income
Lending and finance
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.
Charging your own company interest on your loan account
Deductible
The company can deduct the interest it pays you if the money was used in the business, and you must declare that interest as income.
You can claim this · Company
Interest on funds borrowed and applied for trade purposes is deductible by the company, and it is taxable in your hands at your marginal rate, subject to your annual interest exemption. The two sides do not cancel out neutrally: the company saves at the company rate and you pay at your marginal rate, so whether this helps depends on your bracket. Interest deductions can also be limited where the lender is a connected person who is not fully taxed on the interest.
Where people go wrong
Charging an interest rate that was never agreed, never paid and only appears when the accountant is preparing the financials. Interest must actually be incurred under a real agreement, and the corresponding income must appear on your personal return in the same year.
Does buying it save you tax?
Sometimes, but run the numbers. If you are in the top marginal bracket, moving profit out of the company as interest can cost more tax than leaving it and taking a dividend, and it adds a limitation risk. It is a modelling exercise, not an automatic win.
Authority s11(a)
governed by Interest incurred on business borrowing
may unlock Local interest exemption
Lending and finance
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.
Cheap or interest free loan from your employer
Not deductible
If your employer lends you money at below the official rate, the interest you are not paying is a taxable fringe benefit that must run through your payslip.
There is no relief for this · Salaried employee
The taxable benefit is the difference between interest at the official rate and the interest you actually pay. It is added to your remuneration and PAYE is deducted on it, so it shows up on your IRP5 as a fringe benefit code rather than as cash. There are carve outs, including for small casual loans and for loans to fund study, and the benefit falls away entirely if you are charged the official rate or more. If you use the borrowed money to produce income, for example to buy a rental property, you may be able to claim a deduction for the deemed interest.
Where people go wrong
Assuming that because no cash changed hands there is nothing to declare. The benefit is taxed even though you never received money, and a salary advance that is not repaid by year end can be treated as remuneration in full.
Does buying it save you tax?
A cheap staff loan is still cheaper than a bank, even after the fringe benefit tax, because you are taxed only on the interest saving at your marginal rate rather than paying the full interest. Just budget for the PAYE.
Authority Seventh Schedule para 11
excluded by Salaried employees cannot deduct ordinary work costs
governed by Low interest loan from an employer
Lending and finance
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 card fees and interest where the card is used for the business
Apportioned
Card fees and interest are deductible only to the extent the card was used to fund business spending, and you need the statements to prove the split.
Claim the business share only · Sole proprietor or freelancer
Interest follows the use of the money. If a card carries a mixed balance of business stock and family groceries, only the portion attributable to the business borrowing is deductible, and you have to be able to show how you arrived at the split. A dedicated business card makes the whole balance traceable and removes the argument. Personal credit card interest on its own is never deductible.
Where people go wrong
Claiming the full card interest because most of the spending was for the business. Most is not a calculation. Without a defensible apportionment based on the actual statement lines, the entire claim is at risk, not just the personal part.
Work out your share
Enter a cost and a percentage. The percentage has to be one you can defend with
something real, floor area for a room, a logbook for a vehicle, an itemised bill
for a phone.
Does buying it save you tax?
Credit card interest is one of the most expensive forms of borrowing available. Getting a deduction for part of it recovers only your marginal rate, so this is a reason to clear the card, not to keep the balance.
Authority s11(a)
governed by General deduction for expenditure in producing income
governed by Interest incurred on business borrowing
Lending and finance
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.
Debit order processing or collection fee, charged separately from the debit order itself
Apportioned
A debit order fee is a banking cost that follows the debit order it belongs to, business or personal, same principle as an ATM fee following the withdrawal. 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.
Claim the business share only · Sole proprietor or freelancer
Where the underlying debit order is a business expense (e.g. a business insurance premium or a software subscription), the fee that collects it is deductible alongside it. Where the debit order is personal, the fee is not.
Where people go wrong
A blanket bank-charges claim that lumps every fee line together will pull personal debit order fees into a business claim if the account is mixed use.
Work out your share
Enter a cost and a percentage. The percentage has to be one you can defend with
something real, floor area for a room, a logbook for a vehicle, an itemised bill
for a phone.
Does buying it save you tax?
Small individually, worth tracking as part of the same reconciliation that already has to identify each debit order's purpose.
Authority s11(a)
governed by General deduction for expenditure in producing income
Lending and finance
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.
Director or shareholder loan account going into debit
Not deductible
If you owe your company money and pay no interest or a low rate, the shortfall is treated as a deemed dividend and the company owes dividends tax on it.
There is no relief for this · Company
Where a company lends to a shareholder or a person connected to a shareholder at below the official rate of interest, the interest shortfall is treated as a deemed dividend in specie, and the dividends tax is the company's liability, not yours. If the loan instead arises because you are an employee, the low interest fringe benefit rules can apply through the payroll rather than the dividends tax route. Charging and actually paying interest at the official rate is the standard way to switch the deemed dividend off.
Where people go wrong
Treating drawings as harmless because it is your own company. The deemed dividend recurs every year the debit balance sits there, and the dividends tax is often only discovered at audit with interest and penalties on top. A second trap is simply writing the debit balance off, which converts it into a full deemed dividend on the amount waived.
Does buying it save you tax?
This is a cost, not a saving. The cheapest fix is usually to clear the balance, or to formalise interest at the official rate, or to declare a proper dividend or salary instead and pay the tax openly.
Authority s64E(4)
governed by Local dividends are exempt but carry withholding tax
may unlock Low interest loan from an employer
Lending and finance
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.
Doubtful debts allowance on overdue debtors
Depends
You can claim an allowance for debts that look doubtful but are not yet written off, calculated on a prescribed basis rather than on your own estimate.
The answer turns on the facts · Company
The doubtful debt allowance is based on how long a debt has been outstanding, using percentages set in the legislation, and the basis differs depending on whether the taxpayer applies IFRS 9 for financial reporting. Whatever allowance you claim in one year is added back to income in the following year and a fresh allowance is calculated, so it is a timing benefit rather than a permanent one. Your own accounting provision is not automatically the tax number.
Where people go wrong
Claiming the accounting provision straight off the trial balance. The tax allowance is a formula driven number tied to ageing, and it is not the same as the provision your accountant raised. A second trap is forgetting the add back in the following year, which understates that year's income.
Does buying it save you tax?
It is a cash flow benefit only. The allowance reverses next year, so it defers tax rather than saving it. The real saving only arrives when the debt is finally written off as bad.
Authority s11(j)
governed by Bad and doubtful debts
Lending and finance
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.
Early settlement penalty on paying off a loan
Depends
If the interest on the loan was deductible, the settlement penalty usually follows it, but a penalty on a private loan gives you nothing.
The answer turns on the facts · Sole proprietor or freelancer
A settlement or breakage charge is a cost of the borrowing arrangement, so it tends to take the same character as the interest it replaces. Where the loan funded a trade and the interest was deductible, there is a good argument for deducting the penalty in the year it is incurred. Where the loan funded a private house or a personal purchase, there is no deduction. Note that this is a contractual charge, not a fine imposed by law, so the rule denying deductions for fines and penalties does not apply to it.
Where people go wrong
Confusing a commercial settlement penalty with a statutory fine and writing it off as automatically non deductible, or the reverse, deducting a penalty on a private bond because it appeared on a bank statement alongside deductible items.
Does buying it save you tax?
Settling early usually saves more in interest than the penalty costs, and the tax treatment is a second order question. Do the interest maths first.
Authority s11(a)
excluded by Fines, penalties and unlawful payments are not deductible
governed by Interest incurred on business borrowing
Lending and finance
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.
Financial adviser or planner fees
Not deductible
Fees paid for personal financial advice are private expenditure and are not deductible, whether you pay them separately or they come off the investment.
There is no relief for this · Anyone
Advice on your own affairs is not incurred in the production of income and is not deductible. Where the fee is deducted inside a retirement annuity or a unit trust, it simply reduces your investment value and never appears as a separate claim, but the contribution deduction for retirement funding is based on what you contributed, not on what was left after fees. Fees paid by a business for advice on its own trading operations are a different question and can be deductible.
Where people go wrong
Trying to add adviser fees on top of a retirement annuity contribution deduction, or claiming them against rental or interest income. The retirement contribution deduction has its own formula and limits and does not stretch to advice costs.
Does buying it save you tax?
Not from a tax point of view. Good advice can be worth paying for, but it is paid out of after tax money. If someone sells advice on the basis that the fee is tax deductible, ask them to name the section.
Authority s23(a)
governed by Investment fees are generally not deductible against interest
may unlock Retirement fund contribution deduction
Lending and finance
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.
Foreign exchange loss on a payment to an overseas supplier
Depends
Exchange differences on business debts are generally brought to account for tax, but the rules differ sharply between companies and individuals.
The answer turns on the facts · Company
For a company, exchange gains and losses on foreign currency debts and forward contracts are usually included or deducted as they arise, whether or not the amount has been settled. For an individual or a trust the rules are narrower and often only apply where the item is held in the course of trade, which means a private foreign payment may produce no deduction at all. The distinction between a realised loss on settlement and an unrealised year end translation difference matters and is not intuitive.
Where people go wrong
An individual assuming a company style translation loss can be claimed on a personal foreign transaction. The other common error is converting at the year end rate when the correct rate for that item is the spot rate on the transaction date or an approved average rate.
Does buying it save you tax?
This is not a planning item, it is a reporting obligation. If you deal in foreign currency at any scale, the cost of getting the conversion basis right in your accounting system is far lower than fixing it under audit.
Authority s24I
governed by General deduction for expenditure in producing income
governed by Currency conversion basis
Lending and finance
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.
Formally writing off or waiving a loan owed to you by a relative
Not deductible
Cancelling a loan is a gift of whatever was still owed, so it can trigger donations tax on the outstanding balance in the year you waive it.
There is no relief for this · Anyone
Waiving a debt is treated as a disposal of property for no consideration, which is the definition of a donation. Donations tax is payable by the donor, subject to the annual exemption, and is a separate return and payment from your income tax. If the borrower was a trading business, the waiver can also create a taxable recoupment or a reduction of its expenditure and assessed loss in the debtor's hands, so the person you are trying to help can end up with a tax bill.
Where people go wrong
Doing the waiver casually in a WhatsApp message and never filing anything. Donations tax has its own return and its own payment deadline tied to the month the donation takes effect, and interest and penalties run from that date, not from your income tax assessment.
Does buying it save you tax?
There is no tax saving in waiving a loan, and there is a real tax cost. If your intention is to give the money away, look at whether spreading it across tax years, or the spousal exemption, is a better route than one large waiver.
Authority s55
governed by Donations tax on gifts
may unlock Donations between spouses are exempt
Lending and finance
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.
Giving someone a cash gift
Not deductible
Gifts of cash are not deductible for you and not income for the person receiving them, but donations tax can apply to you as the giver above the annual exemption.
There is no relief for this · Anyone
Donations tax is a separate tax paid by the donor, not by the person receiving the gift. Individuals have an annual exemption that resets each tax year, and donations between spouses are exempt without limit. A gift to a registered public benefit organisation with an eighteen A certificate is a different animal entirely, because that one is deductible against your income within limits. Donations above the exemption require a donations tax return and payment within a set period after the month the donation takes effect.
Where people go wrong
Assuming the recipient pays the tax, or assuming that splitting a large gift into monthly payments avoids it. The exemption is an annual amount across all donations you make in that tax year, so many small gifts add up to the same place as one large one.
Does buying it save you tax?
Giving money away never saves you income tax. The only version of gifting that reduces your tax bill is a donation to a section eighteen A approved organisation with a valid certificate. Ordinary generosity to family is a spending decision.
Authority s54
governed by Donations tax on gifts
may unlock Section 18A donation deduction
may unlock Donations between spouses are exempt
Lending and finance
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.
Giving your child the deposit for a house
Not deductible
The deposit is either a gift, which can attract donations tax on you, or a loan, which has to be documented and eventually repaid or written off.
There is no relief for this · Anyone
There is no deduction and no income tax on either side. If it is a gift, it counts towards your annual donations tax exemption and anything above that is taxable at the donations tax rate. If it is a loan, record it, because it stays an asset in your estate and, if your child later sells, the money you contributed does not automatically form part of their capital gains base cost unless they actually bore the cost. Money given to a spouse is exempt from donations tax without limit.
Where people go wrong
The base cost trap. A parent pays the deposit, the property is registered in the child's name, and years later the child sells and cannot prove the full cost of acquisition. Keep the conveyancer's statement and the proof of payment with the property file for as long as the property is owned plus the record retention period.
Does buying it save you tax?
No tax saving. If the amounts are large enough that donations tax bites, spreading the help across tax years, or routing part through a spouse, is worth costing out with a practitioner before the transfer date.
Authority s54
governed by Donations tax on gifts
may unlock Base cost includes far more than the purchase price
Lending and finance
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.
Guaranteeing a home loan or bond for your child
Not deductible
Signing as guarantor on someone else's bond has no tax effect while nothing goes wrong, but paying the instalments for them is a gift each time.
There is no relief for this · Anyone
The guarantee itself is not a donation and is not deductible. The tax question only arises if you actually pay. If you pay and expect to be repaid, you have made a loan, with all the documentation and, where a trust or company is involved, deemed donation consequences. If you pay with no intention of being repaid, each payment is a donation and counts towards your donations tax position for that year.
Where people go wrong
Quietly covering a few instalments when your child is short and never deciding whether it is a loan or a gift. Years of undocumented payments are hard to reclassify afterwards, and they can also complicate the estate if you die believing you were owed money.
Does buying it save you tax?
No tax benefit either way. Decide up front in writing whether the help is a loan or a gift, because that decision, not the payment itself, is what drives the tax.
governed by Donations tax on gifts
governed by Maintenance payments are not deductible
Lending and finance
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.
Interest free or low interest loan to your own trust
Not deductible
An interest free or cheap loan to a trust is treated as an ongoing donation to that trust every single year, and donations tax is payable by you as the lender.
There is no relief for this · Trust
Where a natural person, or a company connected to that person, lends to a trust they are connected to, or to a company held by that trust, and the loan carries no interest or interest below the official rate, the shortfall between the official rate and what is actually charged is deemed to be a donation made by the lender on the last day of each year of assessment. The annual donations tax exemption can be set against it, but the deemed donation repeats every year for as long as the loan stands. The rule was introduced specifically to shut down the classic sell to the trust on interest free loan account estate plan.
Where people go wrong
Believing an old trust structure is grandfathered. The rule applies to existing loans as well as new ones, so structures created long before it came in are caught. The second trap is charging interest on paper and then never paying it, or capitalising it, which creates its own accrual and interest income problems for the lender.
Does buying it save you tax?
This is a compliance obligation, not an opportunity. If you have a trust with a loan account, get it assessed properly, because the annual deemed donation and the resulting donations tax return are among the most commonly missed filings in South African estate planning.
Authority s7C
governed by Donations tax on gifts
governed by Interest free loan to a trust is a deemed donation
may unlock Income attributed back to the donor
Lending and finance
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.
Interest on a business loan
Deductible
The interest on a loan taken for business purposes is deductible, but only the interest, never the capital portion of the instalment.
You can claim this · Sole proprietor or freelancer
The monthly instalment on a business loan or vehicle finance agreement is part interest and part capital repayment. Only the interest is deductible. The capital portion buys an asset, and the asset gets its relief through wear and tear or a capital allowance instead. Ask the lender for an annual interest certificate or amortisation schedule, because the split is not visible on the bank statement.
Where people go wrong
Claiming the full instalment. This is one of the most common corrections SARS makes on small business returns, and it usually leads to a broader review once it is picked up. The second trap is claiming both the full instalment and wear and tear on the same asset, which is double counting.
Does buying it save you tax?
Yes for the interest you are already paying, but borrowing does not create a tax saving. Only the interest and the asset allowance are deductible, so the loan itself never pays for itself in tax.
Authority s11(a)
governed by Interest incurred on business borrowing
may unlock Wear and tear on business assets
Lending and finance
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.
Interest on a personal loan or home bond with no business or rental use
Not deductible
Interest on borrowing used for private purposes is not deductible, because it was not incurred in the production of income. 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 mirror image of R-BUS-017 and R-EMP-008: interest only qualifies when the borrowed money produced income. A home loan on a residence with no home office or rental use, or a personal vehicle loan with no business use, fails that test entirely and the interest is private expenditure.
Where people go wrong
People assume any loan interest is deductible because business loan interest is. The deduction lives with what the money was used for, never with the fact that interest was paid.
Does buying it save you tax?
Not applicable, this is a not_deductible item recorded so the app can correctly say no rather than leaving the line unclassified.
Authority s11(a) read with s23(g)
excluded by General deduction for expenditure in producing income
Lending and finance
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.
International transaction or currency conversion fee on a card purchase
Apportioned
Follows the character of the purchase it was charged on: a business software subscription billed in USD carries a deductible conversion fee, a personal overseas purchase does not. 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.
Claim the business share only · Sole proprietor or freelancer
Every bank's pricing guide lists this fee (R1 to R2-ish per transaction, sometimes a percentage), but none of them says anything about its tax character, because that is never a banking question. It is decided by what was bought.
Where people go wrong
Increasingly common because so many SaaS tools and international subscriptions bill in USD. A business that pays for five or six international tools a month accumulates real deductible fees that are easy to miss because each line is small.
Work out your share
Enter a cost and a percentage. The percentage has to be one you can defend with
something real, floor area for a room, a logbook for a vehicle, an itemised bill
for a phone.
Does buying it save you tax?
Genuinely worth tracking for a business with several international subscriptions; trivial for an individual with one overseas purchase a year.
Authority s11(a)
governed by General deduction for expenditure in producing income
Lending and finance
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.
Investment platform, brokerage and asset management fees
Not deductible
Investment fees are generally not deductible against interest or dividend income, but brokerage on a share purchase and sale does count for capital gains.
There is no relief for this · Anyone
For an individual investor, fees incurred to manage a portfolio are not deductible against interest income, and dividends are largely exempt so there is nothing to deduct them against anyway. The route that does work is base cost: commission, brokerage and transfer costs directly related to acquiring and disposing of a share are included in the base cost and the disposal costs, which reduces the capital gain. Ongoing annual management fees do not qualify as base cost. A person genuinely trading in shares as a business is on a different footing entirely.
Where people go wrong
Deducting the annual platform fee off your interest income before declaring it, or netting fees against dividends. Also common is losing the broker notes: without them you cannot prove the brokerage you want to add to base cost years later.
Does buying it save you tax?
There is no meaningful tax relief for investment fees. The correct response to high fees is to negotiate them down, not to look for a deduction that does not exist.
Authority s11(a)
governed by Investment fees are generally not deductible against interest
may unlock Base cost includes far more than the purchase price
may unlock Trader or investor changes everything
Lending and finance
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.
Invoice discounting and debtor factoring fees
Deductible
The discount and fees charged by a factoring house are a business finance cost and are deductible against your trading income.
You can claim this · Sole proprietor or freelancer
You still declare the full invoice value as income, and the discount, service fee and interest element charged by the financier are deductible expenses. Where the arrangement is a true sale of the book rather than a loan against it, the accounting and the tax analysis differ, and the treatment of any later bad debt shifts to whoever carries the credit risk. Get clarity from the agreement on whether it is recourse or non recourse before deciding who can claim a bad debt.
Where people go wrong
Declaring only the net amount received from the factoring house as income. The gross invoice is your income and the discount is your expense. Netting them off hides turnover, which matters for VAT registration thresholds, turnover tax eligibility and small business corporation tests.
Does buying it save you tax?
Factoring is expensive money bought for cash flow reasons. The deduction is real but it does not change the fact that the effective annual cost is usually well above a bank facility.
Authority s11(a)
governed by General deduction for expenditure in producing income
may unlock Bad and doubtful debts
Lending and finance
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.
Lending money privately and charging interest
Not deductible
The interest you receive on a private loan is taxable interest income and must go on your return, even though nobody sends you an IT3(b).
There is no relief for this · Anyone
Interest on a private loan is ordinary income taxed at your marginal rate. It counts towards the annual local interest exemption for individuals along with your bank interest. Because there is no institution issuing a certificate, nothing pre-populates, so you have to declare it yourself. If you accrue interest but never actually receive it, it is generally still taxable when it accrues.
Where people go wrong
Assuming that because no IT3(b) arrives it does not need to be declared. It does, and if the borrower is a business claiming an interest deduction, SARS has the other side of the transaction on record.
Does buying it save you tax?
Not a tax play. If you are lending anyway, charging a market related rate is what keeps donations tax and deemed donation rules out of the picture, at the cost of making the interest taxable in your hands.
Authority s24J
governed by Interest in a joint or spousal account
may unlock Local interest exemption
Lending and finance
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.
Lending money to a friend or family member interest free
Not deductible
Handing over the money is not a deduction and getting it back is not income, but charging no interest can have donations tax consequences in some cases.
There is no relief for this · Anyone
A loan is a swap of cash for a right to be repaid, so nothing is deductible and the repayment of capital is not taxable. Between two natural persons SARS does not generally deem interest, but the interest you give up can be looked at as a gift of the use of money, and the position hardens once the borrower is a trust or a company (see the trust and company items). Put it in writing with an amount, a repayment expectation and a date, because that document is the only thing separating a loan from a gift later on.
Where people go wrong
People lend on a handshake, the money is never repaid, and years later they try to claim a bad debt or argue it was a loan for estate purposes with nothing in writing. With no loan agreement SARS will usually treat it as a donation from day one, which can pull in donations tax on the original handover.
Does buying it save you tax?
There is no tax benefit to lending money. The reason to document it properly is to avoid a donations tax or estate problem later, not to save tax now.
governed by Donations tax on gifts
may unlock Donations between spouses are exempt
Lending and finance
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.
Lending your own money to your own company interest free
Not deductible
Money you put into your own company is a loan account, not an expense, and drawing it back later is a tax free repayment of capital.
There is no relief for this · Company
The company records a credit loan account owing to you. You get no deduction for putting the money in, and the company gets no income. Repaying you is not a dividend and carries no dividends tax, which makes a properly recorded loan account one of the cleanest ways to get your own money back out of a company. Charging no interest is generally not a problem when a natural person lends to a company, because the anti avoidance rule that deems a donation is aimed at loans to trusts.
Where people go wrong
Not recording the loan account at all. People pay company costs off a personal card for years, never book it, and then cannot explain why they are drawing money out. Without the loan account balance in the books, SARS treats the withdrawals as salary or as a dividend.
Does buying it save you tax?
Worth doing properly. It costs nothing and it preserves a tax free route to take your own capital back out of the company later. Keep the bookkeeping current.
excluded by General deduction for expenditure in producing income
may unlock Interest free loan to a trust is a deemed donation
Lending and finance
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.
Letting a family member use an asset for free
Depends
Giving someone free use of an asset can be treated as a donation of that use, and it also weakens any claim that the asset is income producing.
The answer turns on the facts · Anyone
Free use of property is a disposal of something of value for no consideration, which puts it inside the donations definition, and the value in question is the market rental or market use value rather than the value of the asset itself. Separately, if you let a relative occupy a property rent free, you cannot claim rates, bond interest and maintenance on it, because there is no income being produced. Charging a below market rent to a relative also puts your losses at risk of being disallowed as not being a genuine trade.
Where people go wrong
Claiming a full set of rental deductions on a property occupied by family for a token rent. This is a standard SARS audit target: the deductions are disallowed, the loss is reversed, and understatement penalties can follow.
Does buying it save you tax?
There is no tax upside. If you want the deductions, charge a real market rent and declare the income. If you want to help family, accept that the running costs come out of your own pocket with no relief.
excluded by Rental running expenses are deductible
excluded by Ring fencing of an assessed loss from a suspect trade
governed by Donations tax on gifts
Lending and finance
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.
Money drawn from an access bond and used for the business
Apportioned
Interest on the amount you withdraw is deductible if the money went into the business, so you must track that portion of the bond separately.
Claim the business share only · Sole proprietor or freelancer
Interest follows the use of the funds, not the security. Money drawn from the access facility and paid into the business creates deductible interest on that slice of the bond, even though the bond sits over your home. You need a schedule showing the drawdown date, the amount and where it went, and a calculation of the interest attributable to that portion each year. As you repay, the deductible portion should reduce.
Where people go wrong
Treating the whole bond as business once any drawdown is used for business, or losing the trace because the withdrawal went into a household account first. Keep the drawdown on its own path from the bond into the business account on the same day.
Work out your share
Enter a cost and a percentage. The percentage has to be one you can defend with
something real, floor area for a room, a logbook for a vehicle, an itemised bill
for a phone.
Does buying it save you tax?
An access bond is usually the cheapest borrowing a small business owner has, and making the interest deductible improves that further. The risk is that it puts your home behind the business debt, which is a real cost the tax saving does not compensate for.
Authority s11(a)
governed by Interest incurred on business borrowing
may unlock Home office for a sole proprietor
Lending and finance
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.
Money lost to a scam or fraud
Depends
A personal scam loss almost never gives you a deduction, while a business loss from something like a hijacked supplier invoice can be claimable.
The answer turns on the facts · Anyone
For an individual, money lost in a private capacity is a capital loss of the worst kind: not deductible, and often not even an allowable capital loss because there is no disposal of a recognised asset. For a business, a loss that arises from the ordinary risks of carrying on the trade, such as a fraudulent payment instruction intercepting a genuine supplier payment, has a reasonable case for deduction because the exposure came from trading. The stronger the link to normal trading operations, the better the case.
Where people go wrong
Assuming a large loss must be claimable somewhere because the amount is painful. It usually is not. The other trap is the investment scam: money paid into a scheme that turns out to be fraudulent is not automatically a capital loss, because you must show you acquired and then disposed of an asset. Get the criminal case number and the forensic report either way, they are the evidence for any claim.
Does buying it save you tax?
There is no upside. The honest answer is that most scam losses produce no tax relief at all, and anyone telling you otherwise should be asked to point at the provision.
Authority s11(a)
excluded by Capital losses carry forward indefinitely
governed by General deduction for expenditure in producing income
Lending and finance
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.
Overdraft interest and facility fees on a business account
Deductible
Interest and fees on an overdraft used to fund the business are deductible in the year they are incurred.
You can claim this · Sole proprietor or freelancer
Overdraft interest funding working capital, stock or trade creditors is incurred in the production of income and is deductible. Facility and service fees on the same overdraft follow the interest. The test is what the borrowed money was used for, not what the facility is called, so an overdraft drawn to pay a personal tax bill or take a holiday does not qualify.
Where people go wrong
An overdraft that started as business funding and was later used to cover drawings. Once personal drawings are funded out of the facility, the deductible portion of the interest shrinks and SARS expects the calculation, not a round figure.
Does buying it save you tax?
The deduction softens the cost but does not make an overdraft cheap. Overdraft rates are high, and you recover only your marginal rate of the interest.
Authority s11(a)
governed by Interest incurred on business borrowing
Lending and finance
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.
Paying a family member's expenses for them
Not deductible
Supporting family is not deductible, and if the person is not legally your dependant the payments can count as donations.
There is no relief for this · Anyone
Maintenance and support payments are private expenditure with no deduction. Payments made to a person you are legally obliged to maintain are generally outside donations tax, but generosity to relatives you have no legal duty towards is a donation and counts against the annual exemption. Medical expenses are the one significant exception worth checking: qualifying medical costs you pay for certain dependants can feed into the additional medical expenses tax credit even where the person is not on your scheme.
Where people go wrong
Missing the medical credit. People pay a parent's hospital account, assume nothing is claimable because they are not a dependant on the medical aid, and never test it against the additional medical expenses rules. Keep the invoices and the proof that you paid.
Does buying it save you tax?
Only the medical portion has any real chance of giving something back, and even then it comes through a credit with a floor rather than a straight deduction. Everything else is spending, not tax planning.
Authority s6B
governed by Donations tax on gifts
governed by Maintenance payments are not deductible
may unlock Medical costs paid for someone not on your scheme
Lending and finance
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.
Personal loan taken out and used in the business
Apportioned
The label on the loan does not matter, the use of the money does, so interest on a personal loan applied to the business can be deducted.
Claim the business share only · Sole proprietor or freelancer
The test for deducting interest is whether the borrowed funds were applied for the purposes of trade. A personal loan whose proceeds went straight into stock, equipment or wages produces deductible interest. What you need is a clean money trail: the loan proceeds landing in an account and going out to identifiable business payments. If only part of the loan went to the business, only that proportion of the interest is deductible.
Where people go wrong
Borrowing into a personal account where the money mixes with salary and household spending, then trying to reconstruct the business use afterwards. Once the money is mixed, the trace is very hard to prove and the deduction usually fails.
Work out your share
Enter a cost and a percentage. The percentage has to be one you can defend with
something real, floor area for a room, a logbook for a vehicle, an itemised bill
for a phone.
Does buying it save you tax?
The deduction is real, but personal loan rates are usually far above business finance rates. Do not choose a more expensive loan because part of the interest is deductible.
Authority s11(a)
governed by General deduction for expenditure in producing income
governed by Interest incurred on business borrowing
Lending and finance
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.
Raising fees, initiation fees and origination fees on a loan
Depends
Fees for raising business finance are generally treated as part of the cost of the borrowing rather than a once off expense, and may have to be spread over the term.
The answer turns on the facts · Sole proprietor or freelancer
Where the loan funds a trade, the finance related charges are typically brought into the interest calculation and recognised over the life of the instrument rather than deducted in full on day one. Where the loan funds a private purchase, or the acquisition of a capital asset that produces no income, there is no deduction at all. Because the answer turns on both the purpose of the loan and how the fee is characterised, this is one to confirm rather than assume.
Where people go wrong
Deducting a large once off raising fee in full in year one when it should be spread, which creates an understatement in that year and a mismatch in later years. The opposite trap is capitalising it into an asset that gets no allowance, which loses the relief permanently.
Does buying it save you tax?
Neutral. The fee is a cost of borrowing that you would pay anyway, and the timing of the deduction, not its existence, is what is usually in dispute.
Authority s24J
governed by Interest incurred on business borrowing
Lending and finance
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.
Selling something to a relative below market value
Base cost only
Between connected persons the sale is treated as happening at market value for capital gains, and the discount you gave can be a donation on top.
No deduction now, it reduces tax when you sell · Anyone
When you dispose of an asset to a connected person, the proceeds are deemed to be the market value of the asset regardless of what actually changed hands, so you can pay capital gains tax on a gain you never received in cash. The buyer's base cost is set at the same market value. The difference between market value and the price actually paid is also capable of being treated as a donation, which brings donations tax into the picture. Transfers between spouses are treated differently and generally roll over.
Where people go wrong
Selling the family house to a child for one rand and expecting no tax. The deemed market value rule means the capital gain is calculated on the full value, the shortfall is a donation, and transfer duty is also assessed on market value rather than on the stated price.
Does buying it save you tax?
This is usually more expensive than either an outright sale at market value or leaving the asset to be inherited. Get the numbers modelled including capital gains tax, donations tax, transfer duty and estate duty before signing anything.
Authority Eighth Schedule para 38
governed by Base cost includes far more than the purchase price
governed by Donations tax on gifts
may unlock Transfer between spouses rolls over
Lending and finance
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.
Standing surety and having to pay someone else's debt
Not deductible
Paying out on a suretyship is usually a capital loss with no deduction, unless guaranteeing debts is genuinely part of how you earn your income.
There is no relief for this · Anyone
A payment under a guarantee is generally not expenditure in the production of income, it is the cost of a risk you took on outside your trade, so the general deduction formula does not reach it. If you have a right of recourse against the person you paid for, you acquire a claim against them, and any loss only crystallises when that claim proves worthless. Where the person you stood surety for is a connected person, a resulting capital loss is generally disregarded.
Where people go wrong
Deducting the payment in the year you pay the bank. In most cases nothing happens for tax at that moment because you have simply exchanged cash for a claim against the debtor. The loss, if any, comes later and is usually capital and often disregarded.
Does buying it save you tax?
There is no tax comfort here. Treat a suretyship as money you may have to hand over with no relief, and price the favour accordingly.
Authority s11(a)
excluded by General deduction for expenditure in producing income
may unlock Capital losses carry forward indefinitely
Lending and finance
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.
Theft of cash or stock from the business
Depends
Theft losses that arise from the ordinary risks of the trade are usually deductible, but theft by an owner or a senior person generally is not.
The answer turns on the facts · Sole proprietor or freelancer
Cash taken from a till, stock lost to shoplifting or a robbery on the premises are risks that come with running that kind of business, and losses of that sort have generally been treated as deductible. Theft committed by the proprietor, a partner or a senior person effectively acting as the business is treated differently, because the loss does not arise from the trade, it arises from the owner. Any insurance recovery must be brought back into income, so it is the net loss that ends up being relieved.
Where people go wrong
Claiming the loss with no evidence. You need the police case number, the stock or cash reconciliation showing the amount, and the insurance claim outcome. A stock loss claimed by simply reducing closing stock with no supporting count is the version SARS reverses.
Does buying it save you tax?
It is loss recovery, not a benefit. You get back your marginal rate on money that is gone. Insurance and controls are worth far more than the deduction.
Authority s11(a)
governed by General deduction for expenditure in producing income
may unlock Recoupment when an asset is sold
Lending and finance
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.
