You and your tax

Earning commission? Your tax return might be trickier than you think

It's that time of year again – tax season is here, and SARS has opened the window for individual taxpayers to submit their annual returns or check their auto-assessments. Whether this is your first return or your fifteenth, it's always a good idea to double-check that your documents are in order, especially if you earn any form of commission income.

While salary earners typically have tax deducted automatically through PAYE (Pay-As-You-Earn), those who earn commission—either regularly or occasionally—may find their tax situation a little more complex.

What Makes Commission Income Different?

If you earn commission on top of your basic salary, that portion of your income may not always be taxed at the correct rate automatically—especially if you earn commission from more than one employer or your earnings vary month to month.

SARS considers commission income to be "variable remuneration", which can affect how your overall tax is calculated. If your employer does not deduct enough tax during the year, you might owe SARS more when you submit your return.

Can You deduct certain expenses?

SARS allows the claiming back of expenses against income if it meets the criterion of being, “incurred in the production of income.” This test determines the ability to claim back an expense based on its necessity for generating income. The rule of thumb is that in order to claim, you must have incurred expenses that directly relate to earning your income. No personal expenses can therefore be claimed as a tax deduction.

Here are some things that can be claimed back from SARS as a commission-earner:

Travel Costs:

Commission earners can claim actual travel expenses, unlike other employees who may not receive a travel allowance or use of a company vehicle. Business kilometres for visits between home, office, and clients are claimable, but personal travel from home to office is not.

Vehicle Costs:

Claims can include wear-and-tear allowances, interest on instalment sale agreements, maintenance, fuel, licence, and insurance costs. Keeping a detailed logbook is compulsory to record all of these expenses, along with invoices and receipts. SARS will ask for them.

Phone and internet Costs:

Expenses for business use of cell phones or home office internet are claimable, often at an 80% business to 20% personal use ratio.

Entertainment Expenses:

Expenses for sales and marketing initiatives are claimable, with documentation required for verification.

Home office Expenses:

Commission-earners are also able to claim home office expenses proportionate to the area used for business on rent, rates, water and electricity, cleaning, internet connectivity, and wear and tear allowances on business equipment. 

What Should You Do?

Here are a few smart steps to take:

>    Check your IRP5/IT3(a): Make sure your commission earnings are reflected correctly.

>    Keep track of any additional income sources, especially if you've worked for more than one employer.

>    Understand your deductions: As a commission earner, you may qualify to claim for business-related expenses (like travel, phone usage, or marketing costs), but SARS has strict rules—so accurate records are essential.

Need Help?

Tax can feel intimidating, but you don't need to navigate it alone. It's worth getting advice, especially if you've earned substantial commission or think you may owe more tax than expected. The LegalWise Tax Department is ideally suited to assist you with any queries you have in this regard. Please feel free to contact us.

Stay informed, stay compliant, and avoid surprises this tax season. Commission income can work in your favour if you manage it wisely!