As taxpayers, we often encounter various deductions on our tax returns. However, some lesser-known deductions can easily slip through the cracks. To help you navigate these less understood tax deductions, we’ve outlined them below. These deductions fall under the “Other Deductions” section of the ITR12 form.
1. Section 11(nA) and Section 11(nB)
Scenario: Imagine an employee who violates an agreement with their employer. As a consequence, they may need to repay a benefit they previously received—such as a bonus, maternity leave benefit, bursary, or sign-on bonus.
Tax Treatment: If this benefit was already taxed and appears as income on the employee’s IRP5, the taxpayer can claim the s11(nA) and/or s11(nB) deduction. By doing so, they can reduce their taxable income and reverse the tax already paid on the benefit.
2. Allowable Accountancy Fees
Eligibility: While this deduction is available to all taxpayers, it’s crucial to understand who qualifies.
• Eligible Taxpayers:
o Commission earners
o Freelancers
o Sole proprietors
o Taxpayers with investment income (provided it exceeds the claimed accountancy fee)
o Rental income earners
o Pensioners – 60 years and older (whose income is managed by a financial institution)
• Ineligible Taxpayers:
o Salary-only earners (even if they paid for accounting services during the tax year)
3. Bad Debts Claim
Definition: A bad debt refers to an amount the taxpayer was due to receive as income but never actually received and is unlikely to receive in the future. This situation often arises for commission earners, freelancers, or employees who leave a company before receiving their due bonus.
Claim Process:
• The unpaid amount must be reflected on the taxpayer’s IRP5 or included in turnover/sales (for sole proprietors).
• By claiming a bad debts expense, the taxpayer can reverse the tax charged on income that was never received.
For personalised guidance on completing and submitting your tax returns, as well as maximising available tax deductions, consider reaching out to Tax A Sured (Pty) Ltd. Our experienced professionals can help you navigate the complexities of tax compliance and ensure you optimise your tax position effectively.
Remember, proactive tax planning can make a significant difference in your financial well-being. Don’t hesitate to seek professional advice when needed.
