Tax & SARS

A Business Expense Isn't Automatically Tax Deductible

A business can spend money without automatically being entitled to deduct the entire amount from taxable income — an expense generally needs to satisfy the Income Tax Act's requirements, including being incurred in the production of income.

Entrepreneurs sometimes think spending on the business automatically means SARS must allow the deduction. That's not how tax deductions work — the nature and purpose of the expense matter, which is why keeping supporting documents is essential.

Source: Income Tax Act 58 of 1962

Frequently Asked Questions

Can every business expense reduce taxable income?

No.

What does "incurred in the production of income" mean?

Broadly, the expense must have the required connection to producing income, subject to the detailed rules of the Income Tax Act.

Why should businesses keep supporting documents?

They provide evidence supporting the nature and amount of expenses claimed.

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