If you are a commission earner and meet certain requirements, you are allowed far greater tax benefits than a normal salaried taxpayer. The general rule is that if you earn commission income you are entitled to significantly reduce your tax payable if your commission income is 50% or more of total remuneration received. Remuneration is a very wide term and includes practically all types of income that you can receive from your employer. For example, a medical scheme benefit, most allowances and a bonus would all be included in your remuneration from your employer. All these types of income must, therefore, be added together to determine what percentage commission income is of total remuneration. In the event that your commission income is more than 50% of your total remuneration, you are not restricted to deduct only certain types of expenses (as are individuals with normal salaried income).
Taxpayers who receive commission as part of their income, are allowed to deduct business expenses on their tax returns. However, you are only allowed to claim these expenses if your commission income exceeds 50% of your total annual income.
Home office expenses
Home office expenses may be claimed for a home office/study. But the area used must be specifically used to trade, and not for anything else. The expenses that may be claimed includes the rent, cost of the bond, interest on the bond. The cost is then apportioned to the percentage of the office in relation to the total area of the home. Thus, if your home is 120sq/m and you use a 12sq/m area for an office, a total of 10% of the cost may be deducted from the income.
Stationery and printing
Just like the home office expenses, the cost of stationery and printing must be split between business and private use. If you print 100 pages, and only 30 are for business purposes, then you can only claim the cost of the 30 pages used for business.
Telephone and internet cost
Expenses for telephone and internet may also be claimed as business deductions. The deduction must be indicated as a percentage for business use of the total cost.
Taxpayers who receive commission without a travel allowance are allowed to deduct expenses against their vehicle. Car maintenance, insurance, petrol and interest on the finance on the vehicle may be claimed. All these costs must be calculated for the year. The taxpayer then has to keep a logbook with his personal as well as business travel for the year. The percentage of business kilometers traveled is then claimed as a percentage of the total cost. If you have traveled 10 000km in total for the year, and your total expenses is R3 000, you may claim R1 800 if you have traveled 6 000km for business. (60% of the R3 000 total motor vehicle cost.)
Other deductible expenses:
- Bank Charges
- Home Office Expenses
- Telephone and Internet
Records must be kept as proof of the total expenses for all deductions. This includes the private and business use. The business expenses must then be shown to SARS as a percentage of the total expenses.