Business Guide

What Business Expenses Can I Deduct from Tax in South Africa?

One of the most valuable things about running your own business is that genuine business expenses reduce the profit SARS taxes. Most small business owners don't claim everything they're entitled to — and end up paying more tax than necessary. This guide covers what you can deduct, what you can't, and how to make sure SARS accepts your claims.

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The golden rule: An expense is deductible if it was incurred in the production of income and is not of a capital nature. In plain language: you spent it to earn money, and it gets used up (not a long-lasting asset). When in doubt, ask: "Did I spend this money to run my business?" If yes, keep the receipt and claim it.

What you can fully deduct this year

These expenses reduce your taxable profit rand-for-rand in the year you incur them:

inventory

Materials, stock, and raw materials

The cost of whatever you buy to produce your product — leather, fabric, thread, packaging, components. If you buy R50,000 of leather to make and sell products, R50,000 is deducted from your revenue.

campaign

Advertising and marketing

Website hosting, domain registration, social media ads, business cards, photography for your product catalogue, market stall fees. All deductible.

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Professional services

Accountant or bookkeeper fees, lawyer fees for business contracts, tax practitioner fees, design fees. Fully deductible.

package

Packaging and postage

Boxes, bubble wrap, tape, courier fees for delivering orders. Fully deductible.

receipt

Small items under R7,000

Any individual item costing less than R7,000 can be deducted in full in the year of purchase rather than depreciated. A R2,000 hand tool, R1,500 photography equipment, R4,000 laptop bag — all deductible immediately.

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Bank charges on your business account

Monthly fees, transaction fees, and card fees on your business bank account are a business expense.

security

Business insurance

Insurance specifically for your business — tools, stock, liability — is deductible.

Equipment and tools — wear and tear deductions

Larger assets are deducted over their useful life rather than all at once. SARS calls this a "wear and tear allowance." You claim a portion each year.

Asset type	SARS wear & tear period	Yearly deduction on R30,000 item
Computers, laptops, tablets	3 years	R10,000/year
Machinery and equipment	5 years	R6,000/year
Furniture and fittings	6 years	R5,000/year
Motor vehicles	5 years	R6,000/year
Cell phones	2 years	R15,000/year
Items under R7,000	1 year (immediate)	Full amount

Example: You buy a R15,000 leather sewing machine. SARS classifies it as machinery (5 years). You deduct R3,000 per year for 5 years — not R15,000 in year one.

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Keep the invoice or receipt for every piece of equipment. When you file your tax return, you'll list each asset, its cost, the year you bought it, and the annual wear and tear claimed.

Home workspace deduction

If you have a dedicated room in your home that you use exclusively for your business — a workshop, studio, or office — you can deduct a proportion of your home running costs.

check_circleCalculate the percentage of your home used for business: e.g. a 20m² workshop in a 200m² house = 10%

check_circleApply that percentage to: rent or bond interest, electricity, water, rates, internet, cleaning

check_circleDeduct that amount as a business expense

check_circleThe workspace must be used exclusively and regularly for business — a kitchen table where you sometimes work does not qualify

check_circleKeep utility bills for 5 years to support your claim

warning

If you own your home, claiming a home office expense can affect your capital gains tax exemption when you sell. Consult a tax practitioner before claiming this for the first time.

Vehicle expenses

If you use your personal vehicle for business purposes — deliveries, collections, client visits — you can claim a deduction. SARS gives you two methods:

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Method 1: Logbook (SARS fixed rate)

Keep a logbook recording every business trip — date, destination, purpose, and kilometres. Claim R4.84 per business kilometre (2026/27 rate). This is the simpler method and does not require keeping fuel receipts.

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Method 2: Actual cost basis

Calculate your actual vehicle running cost (fuel, insurance, servicing, depreciation) and claim the business-use percentage. More complex but may give a larger deduction for expensive vehicles.

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A logbook is required for both methods. Without it, SARS will disallow the claim entirely. A simple spreadsheet or a free logbook app works.

What you CANNOT deduct

check_circlePersonal expenses — groceries, clothing (unless a uniform or PPE), personal phone calls mixed with business calls

check_circleFines and penalties — including SARS penalties, traffic fines, and late payment charges

check_circleDrawings / salary to yourself — as a sole proprietor, money you take from the business is not a deductible expense (it is profit)

check_circleEntertainment — meals and drinks, unless strictly for client business and documented with names and purpose

check_circleCapital expenses in full — large assets must be depreciated, not deducted immediately (exception: items under R7,000)

check_circlePersonal portion of mixed expenses — if your phone is 70% personal and 30% business, only 30% is deductible

Record keeping — what SARS expects

SARS can audit you for up to 5 years after the tax year. You must be able to prove every deduction you claimed.

check_circleKeep all original invoices and receipts — physical or digital

check_circleKeep bank statements showing the payment

check_circleKeep your logbook if claiming vehicle expenses

check_circleKeep a simple income and expense spreadsheet updated monthly

check_circleStore records for at least 5 years

check_circleBack up digital records — email yourself scans of important receipts

Frequently asked questions

Generally no — expenses must be incurred after the business commenced trading. However, if you bought equipment specifically in preparation for the business (e.g. you bought tools one month before your first sale), SARS may accept it. Consult a tax practitioner for borderline cases.

You can deduct the cost of all materials purchased for the business, whether used in the current year or held as stock. However, the value of unused stock at year-end must be declared as a closing stock figure, which reduces your expense deduction.

Only the business-use portion. If you use your phone 50% for business, you can deduct 50% of your monthly bill. You need to be able to justify the percentage — SARS may ask for records.

Yes, but you need proof. A cash receipt is fine. If there is no receipt, you can write a note with the date, supplier, item, amount, and business purpose. For significant amounts, try to pay by EFT so there is a bank record.

When you file your ITR12 on SARS eFiling, there is a section for business income (sole proprietor / freelancer). You enter your total revenue and each category of expense. The system calculates your taxable profit automatically. For your first time, a tax practitioner can guide you through the correct fields.

Key contacts

SARS helpline: 0800 00 7277
SARS eFiling: efiling.sars.gov.za
SARS wear & tear guide: Search "BPR231 wear and tear" on sars.gov.za

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This guide provides general information only. Tax rules, bank fees, and regulations change — always verify with SARS, your bank, or a registered tax practitioner. Mzansi Money Guide is independent.