Salary earners, excluding persons who earn more than 50% of their salaries by way of commission, are limited with regards to the deductions available against salary income. Unlike commission earners or sole proprietors who are able to claim expenses incurred in the production of their income, salary earners are only allowed the following deductions against their employment income:
- Contributions made by taxpayers to a pension fund, provident fund or retirement annuity fund may be deducted. This deduction is determined as being the greater of 27.5% of remuneration or taxable income, capped at a monetary limit of R350 000;
- Business travel expenses limited to a travel allowance granted or fringe benefit tax paid in respect of the use of a company vehicle. In order to claim this deduction, a detailed log book of business travel must be maintained. Where actual records of the business expense incurred is not kept, the deemed expenditure tables as published by the Minister of Finance can be utilised.
- To the extent that an individual incurs legal fees, wear and tear-related costs or bad or doubtful debts as part of his/her employment, such expenditure will be deductible. Wear and tear allowances are generally claimed in respect of laptops or textbooks acquired for the purposes of work. It may however prove difficult to claim legal fees, bad debts and doubtful debts in respect of employment income;
- Where amounts received, either as a restraint of trade payment or as ordinary remuneration for employment services rendered, are refunded by the employee, those amounts refunded may be claimed as a deduction;
- Expenses incurred towards rent of, cost of repairs of or expenses in connection with any dwelling, house or domestic premises, those costs may be claimed as deductions, to the extent that it relates to a home office, bearing in mind that if this deduction is claimed it will impact upon the primary residence exclusion that one can claim upon disposing of such residence;
- Donations made to qualifying public benefit organisations can be deducted but is limited 10% of taxable income. In order to claim this deduction the person must be in receipt of a section 18A certificate; and
- Investments made in respect of venture capital companies are fully deductible.
The above limitations only apply to salaried income received from employment. Where an individual is also engaged in another trade (such as the renting out of an apartment), the above limitations do not apply to that separate trade.