Staff author
Commission earners: The deductions salaried employees can't claim
Taxpayers who derive the majority of their income from commission are subject to different tax rules than standard salaried employees. They are legally permitted to claim a much wider array of business-related expenses against their taxable income.
How it works
If more than 50% of your remuneration is commission-based (reflected under source code 3606 or 3616 on your IRP5), you are exempt from the strict deductions limitation in Section 23(m) of the Income Tax Act. This exemption allows you to deduct business travel, home office costs, phone and data bills, professional subscriptions, and entertainment costs directly related to securing clients.
Specific Scenarios
* Scenario 1: Cell phone and data. A broker relies entirely on their cell phone to close deals. They can deduct the business-use portion of their monthly phone contract and data bundles against their commission income.
* Scenario 2: Client entertainment. An agent takes prospective buyers out for lunch to discuss property deals. They must retain detailed receipts showing the date, venue, and client name to deduct the expense successfully.
* Scenario 3: Advertising costs. A salesperson pays for targeted social media advertisements to generate leads. Because the advertising directly facilitates the commission income, the invoices are fully deductible.
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When you are not eligible
If your base salary constitutes 60% of your total pay and your commission only makes up 40%, you do not meet the threshold and are treated as a standard salaried employee. Furthermore, SARS aggressively audits commission claims; failing to provide original invoices will result in immediate disallowance.
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Disclaimer:This article is for informational purposes only and does not constitute financial or tax advice, and is not exhaustive. Tax laws are complex and subject to change. We strongly recommend consulting with our registered tax practitioner to address your specific circumstances.