Staff author
If you earn commission, you're probably overpaying SARS
Earning your living through commission completely changes how you are taxed. Because you have to spend your own money to secure clients, the law allows you to deduct a massive range of business expenses that normal employees cannot claim.
How it works
If commission makes up more than 50% of your total pay, you are exempt from the strict deduction limits found in Section 23(m) of the Income Tax Act. You can deduct costs directly related to making a sale, such as travel, phone bills, entertainment, and marketing materials.
Specific Scenarios
* Scenario 1: The client coffee. You are a sales rep. You pay R300 for coffee and lunch while pitching a product to a new client. You keep the receipt and deduct the meal as a valid business entertainment expense.
* Scenario 2: The home office. You earn 80% of your income from commission. You set up a dedicated home office to manage your clients. You deduct a portion of your rent and electricity without facing the heavy restrictions placed on salaried workers.
* Scenario 3: The marketing materials. You pay a designer R2,000 to create promotional flyers for your services. You submit the invoice to SARS to directly lower your taxable commission income.
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When you are not eligible
You cannot claim these broad business expenses if your commission makes up less than 50% of your total remuneration. You also cannot claim expenses that have absolutely no direct link to earning your commission, like buying personal groceries.
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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.