Introduction

When it comes to running a business in South Africa, you’re juggling a lot—deadlines, payroll, supplier negotiations, and of course, keeping SARS happy. But what if I told you that you might be leaving money on the table every single tax season?

It’s not because you’re doing anything wrong. In fact, it’s usually because you’re not claiming everything you could be.

I’ve sat with countless small business owners—from wedding photographers in Cape Town to electrical contractors in Polokwane—who only realise after the fact that they could’ve claimed for things like home office space, marketing spend, or even depreciation on that bakkie they use for deliveries.

The problem isn’t awareness—it’s clarity. So in this article, we’re breaking down the top tax deductions every South African SME owner should know about—with real-world examples, clear explanations, and a few helpful nudges to help you save more come year-end.

Let’s start with one of the most commonly overlooked deductions: your home office.

Deduction #1: Home Office Expenses

Running a business from home isn’t just convenient—it could also be saving you money on your tax bill.

The Basics

If you use a part of your home exclusively and regularly for business purposes, SARS allows you to claim a portion of your home-related expenses. That includes things like:

• Rent or bond interest

• Utilities (electricity, water)

• Cleaning, security, and maintenance

• Internet and phone bills (if not already fully expensed)

But there’s a catch: the space must be used exclusively for business. So, your dining room table that doubles as your workspace during the day? That doesn’t count. But a converted spare room set up as your office? That’s fair game.

Real-Life Example: The Freelance Designer from Durban

A client of mine, Thandi, is a freelance graphic designer who works from a dedicated office in her two-bedroom flat. Before we spoke, she wasn’t claiming any home office deductions—she didn’t even know she could. After we calculated the percentage of her flat used for her business and factored in her rent, electricity, and fibre, we discovered she could deduct over R20,000 in expenses for the year.

That’s not a loophole. That’s smart, legal tax planning.

How to Claim It Correctly

1. Measure your space: Calculate the square meterage of your dedicated workspace in relation to your entire home.

2. Keep records: SARS may request supporting documentation—so hold onto invoices, lease agreements, and utility bills.

3. Log your working hours: Especially if your home office is used seasonally or part-time.

4. Don’t overclaim: Only include costs that relate to the portion of the house used for work.

Questions to Ask Yourself:

• Do you use a separate room or dedicated space for work in your home?

• Are you tracking your monthly rent and utilities?

• Have you discussed this with your accountant—or are you just assuming it doesn’t apply to you?

Deduction #2: Business Travel and Vehicle Expenses

If your business involves getting out and about—meeting clients, delivering products, or managing job sites—then your car is more than just transport. It’s a tax-saving asset.

Yet many business owners either don’t claim vehicle expenses at all or they do it incorrectly, leading to missed deductions or worse, red flags from SARS.

The Basics

SARS allows you to deduct expenses related to business use of a vehicle, but there are two key requirements:

1. You must keep a logbook, showing the kilometres travelled for business vs. personal use.

2. The expenses must be apportioned accurately—you can’t claim 100% of fuel or maintenance unless the vehicle is used 100% for business (which is rare).

Deductible expenses include:

• Fuel

• Maintenance and repairs

• Insurance

• Licencing and registration

• Wear and tear (depreciation)

• Finance charges (if the vehicle is under a lease or loan)

Real-Life Example: The Plumbing Company That Turned Trips into Tax Savings

One of my clients, a plumbing business based in Johannesburg, had two branded vans on the road daily. They were keeping fuel receipts but had no logbooks, and they weren’t claiming any vehicle-related deductions.

After helping them implement a digital logbook system (you can even use apps like TripLog or LogbookMe), they were able to start tracking each trip—quotations, emergency call-outs, material pickups. Within one tax year, they legally claimed over R75,000 in vehicle expenses between fuel, insurance, and depreciation.

That wasn’t just a tax break—it was a cash flow improvement that gave them room to reinvest in equipment.

Your Options: Actual Cost vs. SARS Prescribed Rate

There are two main ways to claim:

1. Actual Cost Method – You record all vehicle-related expenses and claim the business-use portion based on your logbook.

2. Travel Allowance / Prescribed Rate – You’re reimbursed at a set per-km rate (e.g., R4.64/km for 2024/2025, capped at 32,000 km).

Each method has its pros and cons, depending on whether you own the vehicle personally or through the business, how often you travel, and your record-keeping habits.

Questions to Ask Yourself:

• Do I or my employees regularly drive for business purposes?

• Am I tracking trips with a logbook—or estimating based on memory?

• Have I spoken to my accountant about whether the vehicle should be in my personal name or the business’s?

Pro Tip: Keep It Clean and Consistent

SARS loves documentation. So if you want to claim vehicle expenses:

• Log every trip (date, distance, reason).

• Keep all receipts for fuel, maintenance, and insurance.

• Store your logbook with your tax records—it could be your best friend in an audit.

Deduction #3: Salaries, Wages, and Contractor Payments

Whether you’re paying full-time staff, part-time helpers, or hiring freelancers during peak seasons, people costs are one of the largest—and most deductible—expenses in your business.

But here’s the problem: Many SME owners fail to structure or document their payroll and contractor relationships properly, which not only risks non-compliance with SARS but can also lead to missed deductions.

The Basics

SARS allows you to deduct the following employment-related expenses:

• Gross salaries and wages

• Bonuses, commissions, and overtime

• PAYE, UIF, and SDL contributions (as long as they’re paid over)

• Fringe benefits (e.g. travel allowances, medical aid contributions)

• Approved retirement annuity and pension fund contributions

• Payments to independent contractors (with valid invoices and no employer-employee relationship)

Real-Life Example: The Gqeberha Construction Company That Cleaned Up Its Payroll

I once worked with a construction company in Gqeberha that was paying both employees and part-time subcontractors—but lumping everyone together in their books as “labour.” The result? SARS didn’t accept many of the deductions because they lacked proper payslips, UIF declarations, and contractor agreements.

After we introduced a basic cloud-based payroll system and set up formal agreements with freelancers, they were able to claim over R350,000 in wage-related deductions—plus they avoided penalties for incorrect PAYE submissions.

Key Distinctions Matter

One of the most common mistakes is misclassifying contractors as employees (or vice versa). Here’s how SARS generally views the difference:

If you get this wrong, SARS can reclassify your contractors and hit you with back taxes and penalties.

Tips for Getting It Right

• Use a payroll system (like SimplePay or Sage) to issue compliant payslips.

• Ensure you’re submitting UIF, PAYE, and SDL on time through eFiling.

• Keep signed contracts and valid invoices for all freelancers and contractors.

• Consider third-party payroll reviews before SARS comes knocking.

Questions to Ask Yourself

• Am I separating employee and contractor costs properly in my accounting system?

• Are my payroll taxes up to date and submitted monthly?

• Could I be claiming more by formalising bonus payments or staff incentives?

Story Prompt for Content Hook (Optional)

You could include a mini-narrative like:

“When Mandla, owner of a signage business in Pretoria, got audited, he realised he hadn’t submitted UIF for two of his part-time installers. With some quick cleanup and support from his accountant, he avoided penalties—but more importantly, set up a payroll process that let him start legitimately claiming those wages as tax deductions.”

Deduction #4: Marketing and Advertising Expenses

You might think marketing is just a cost of doing business—but SARS sees it as a valid and fully deductible business expense. And yet, many SME owners forget to claim back on everything from their Facebook ads to branded workwear.

If your business is spending money to attract or retain customers, that spend can probably shrink your tax bill.

The Basics

SARS allows deductions for marketing and advertising costs that are “incurred in the production of income.” That includes a wide range of activities:

• Google Ads, Meta (Facebook/Instagram) advertising

• Email marketing tools (like Mailchimp or Zoho Campaigns)

• Website hosting and SEO services

• Flyers, brochures, business cards

• Print or radio ads

• Branding: uniforms, signage, vehicle decals

• Sponsorships and promotional events (with proper documentation)

The key is clear intent: if the expense is tied to business promotion and growth, it’s likely deductible.

Real-Life Example: The Boutique Owner Who Didn’t Know Her Instagram Ads Were Tax-Deductible

Thuli owns a boutique clothing store in Durban and spends roughly R3,000 a month on Facebook and Instagram ads. For two years, she’d been classifying it as “general expenses” and not claiming it as a specific deduction.

Once we re-categorised her marketing spend properly and pulled invoices from Meta Ads Manager, she was able to reclaim over R30,000 in cumulative advertising costs—money she’d been entitled to all along.

Where Businesses Go Wrong

Many SMEs:

• Use personal cards for ad spend and forget to record it

• Don’t download ad invoices (from Google Ads or Meta)

• Bundle marketing into vague categories like “miscellaneous expenses”

• Don’t account for once-off campaigns like a Black Friday promo or a sponsorship

These oversights add up—fast.

Questions to Ask Yourself

• Are you investing in any form of marketing or promotion?

• Do you separate marketing expenses clearly in your accounting software?

• Are you keeping proof of spend and purpose (like invoices, campaign results, or proposals)?

Pro Tip: Bundle + Categorise for Clarity

Create dedicated expense categories for:

• Digital Ads

• Print & Design

• Branding & Signage

• Events & Sponsorships

This not only makes SARS happy, but it also helps you analyse ROI on each marketing effort.

Deduction #5: Equipment Purchases and Capital Allowances

Whether it’s a new laptop, a delivery van, a printer, or even specialised machinery—the tools you invest in to run your business can offer powerful tax benefits. The key is knowing how and when to claim them.

Unlike operating expenses (like rent or advertising), equipment is considered a capital asset. That means you often don’t deduct the full cost in one go—but you can spread the value out over time through what’s called wear and tear allowances.

The Basics

In South Africa, SARS allows businesses to deduct the cost of fixed assets over several years, depending on the asset’s useful life. This is done through Section 11(e) depreciation (wear and tear).

Here’s a quick example of SARS’s standard write-off periods:

• Computers, laptops: 3 years

• Office furniture: 6 years

• Delivery vehicles: 5 years

• Manufacturing equipment: 5–10 years, depending on type

But there’s more—small assets under R7,000 (excluding VAT) may be written off in full in the year of purchase, if used directly for business.

Real-Life Example: The Bakery That Claimed Its Ovens

A small bakery in Soweto expanded and bought a new industrial oven for R80,000. Initially, they thought they had to deduct the whole amount at once—which isn't how SARS works.

With our help, they spread the deduction over 5 years, aligning with the oven’s useful life. That meant they could reduce their taxable income by R16,000 each year—a consistent saving that made their growth plan more sustainable.

On top of that, they bought smaller baking equipment (mixers, tools) for under R7,000 each—and deducted those immediately.

Tips for Claiming Capital Allowances

• Maintain a fixed asset register with purchase dates, serial numbers, and values.

• Always classify the asset correctly based on SARS’s guidelines.

• If leasing, speak to your accountant—some leases qualify for deductions too.

• Don’t mix personal and business purchases—especially for tech and vehicles.

Questions to Ask Yourself

• Have you bought any new computers, equipment, or tools this year?

• Are you tracking these in a formal register with depreciation schedules?

• Are there small assets you could be claiming fully—but aren’t?

Pro Tip: Capital Doesn’t Mean Complicated

While “capital allowances” sound complex, the principle is simple: If it helps you earn money and has a useful life, you can probably deduct it—either all at once or over time.

Conclusion: Don’t Leave Money on the Table

Tax season doesn’t have to be a scramble or a source of anxiety. With a clear understanding of what SARS allows you to deduct, you can turn your expenses into strategic savings—and free up cash to reinvest into growing your business.

Let’s recap the key tax deductions every South African SME owner should keep in mind:

✅ Home Office Expenses – Claim a portion of your rent, utilities, and internet if you work from home.
✅ Vehicle & Travel Costs – Log your business kilometres and claim fuel, insurance, and maintenance.
✅ Salaries & Contractors – Properly recorded wages, UIF, and contractor payments are fully deductible.
✅ Marketing & Advertising – Every rand spent on promoting your business can come back to you at tax time.
✅ Equipment & Capital Assets – Big purchases aren’t just costs—they’re long-term deductions with serious value.