Can I claim it? How to tell a business expense from a personal one

You are standing at the till with a slip in your hand: printer ink, a new headset, a coffee with a client. The question is always the same. Can I claim this?

Knowing what counts as a business expense is one of the most valuable things you can learn when you work for yourself. Every legitimate claim reduces the income you are taxed on. Every claim that fails SARS’s test is money you may have to pay back later, with interest.

The good news is that SARS does not work from a secret list. It applies the same four questions to every expense. Learn them once and you can make most decisions on the spot, before the slip ever reaches your wallet.

The four questions behind every claim

The starting point for sole proprietors and freelancers is the general deduction rule in section 11(a) of the Income Tax Act. In plain terms, SARS describes it as expenditure that is actually incurred in the production of income, laid out for the purposes of trade and not of a capital nature.

Turned into questions you can ask yourself in the moment, that becomes:

1. Did you actually spend it?The cost must be incurred, not planned or estimated. A quote for new software is not an expense until you are liable to pay it.
2. Was it spent to earn your income?There has to be a clear link between the cost and the work you are paid for.
3. Was it for your business, not your private life?Money not spent for the purposes of your trade cannot be deducted, and private or household spending is excluded.
4. Is it a running cost rather than an asset?Day-to-day costs are deducted in the year you incur them. Assets that last for years are handled differently (more on that below).

Four yes answers mean you are very likely looking at a business expense. A single no usually means it is not, or that only part of it is.

Quick reference: claim it, claim part of it, or leave it out

Costs that usually pass all four questions

For most self-employed people, these are the costs that commonly pass the test when they are genuinely used for the business:

The common thread is purpose. The same laptop bag can be a business expense for a consultant who carries client equipment and a private purchase for someone who uses it for weekends away. SARS looks at why you spent the money, not what you bought.

Where the answer is usually no

These are the areas where self-employed people most often trip up:

• Everyday living costs. Groceries, clothing you could wear anywhere, personal cellphone use and family travel are private, even if you think about work while you are there.
• Fines and penalties. Traffic fines and SARS penalties are not a cost of earning income.
• Your own tax. Income tax paid to SARS is not a deductible business expense.
• Costs with no receipt or record. An expense you cannot prove is an expense SARS can refuse.

Shared costs: the business slice only

Many costs are partly business and partly personal. The rule here is to claim only the business portion, and to have a reasonable, consistent way of working it out.

Cellphone and internet

If roughly a third of your data or call time goes to client work, a third of the cost is the business portion. Keep a sensible basis for that split, such as an itemised bill or a usage record for a typical month.

Your vehicle

If you use your own car for business trips, you can claim the business share of the actual costs of running it, such as fuel, maintenance, insurance and finance charges. That business share is worked out from your business kilometres as a portion of your total kilometres for the year, so a logbook of your business trips is essential.

SARS asks for the date, the kilometres travelled and the business details of each trip, plus your odometer readings at the start and end of the tax year. Trips between home and a regular place of work are generally treated as private.

Home office

SARS allows home office costs only when the space is specifically equipped for your trade and used regularly and exclusively for it. A desk in the corner of the lounge that the family also uses will not qualify. Where it does qualify, you claim a share of costs tied to the home itself, such as rent, rates, electricity, cleaning and repairs.

Big purchases: why the laptop is different

A laptop, a camera, a power tool or office furniture that you will use for several years is not a running cost. You generally cannot deduct the full price in the year you buy it. Instead, SARS allows a wear and tear allowance that spreads the cost over the item’s expected useful life.

What matters day to day is simple: keep the invoice, note the date you started using the item for business, and record how much of its use is for business if it is shared with personal life.

Proof: what SARS can ask to see

A deduction is only as strong as the paperwork behind it. SARS requires you to keep supporting documents for five years from the date you submit your return, because it may ask to see them to verify what you declared.

Three habits that make every claim stand up

1. Capture it on the day.Photograph the slip or save the invoice as soon as you pay, before it fades or goes missing.
2. Write the reason while you remember it.“Lunch with client about the March project” takes ten seconds now and saves an argument later.
3. Log trips as you drive them.A logbook written up months later is hard to trust and harder to defend.