Tax incentive. Picture: THINKSTOCK
Tax incentive. Picture: THINKSTOCK

As an individual taxpayer, you are severely restricted in the deductions you can claim to reduce your tax liability. There are, however, a few lesser-known deductions and allowances that are available to you.

One of these is the wear-and tear-allowance.

The wear-and-tear allowance enables taxpayers to deduct, over a period, the amount that was paid for moveable goods purchased for work use. This results in a reduction of tax liability for the taxpayer.

For example, if you buy a laptop to use for work, you can deduct the cost of this over a certain period to reduce your tax liability. However, you must be required to own a laptop for work and you must use the laptop regularly for work purposes. And you must have obviously paid for the laptop with your own money.

This allowance is not restricted to laptops. Any moveable goods (for example books) you have bought that meet these requirements may also be used to reduce your tax liability.

The period over which you claim the depreciation is entirely dependent on the asset, as each asset has a different write-off period.

For example, laptops have a write-off period of three years. In other words, if you bought a laptop for R15000, you can write off the cost of this laptop at R5000 a year for three years.

A drill or medical equipment can be written off over six years, while laboratory research or workshop equipment can be written off over five years, for example.

Any assets that are purchased for less than R7000 may be deducted in full in the year in which you purchase them.

The effect of this deduction is best illustrated by means of an example:

Example 1: No deduction for wear and tear

  • Taxable income (salary): R400000
  • Tax liability: R93039 (excluding rebates)

Example 2: Deduction for wear and tear

  • Taxable income (salary): R400000
  • Cost of laptop: R15000
  • Deduction per year: R5000
  • Cost of books (all under R7000): R5000
  • Total deductions: R10000
  • Final taxable income: R390000
  • Tax liability: R89939 (excluding rebates)

The taxpayer has, in this example, reduced their tax liability by R3100 for the tax year by utilising the wear-and-tear deduction.

In other words, the taxpayer has reduced their tax liability by 31% of the total deduction claimed.

Note that if you are a taxpayer paying tax at a higher marginal rate, you will reduce your tax liability by a higher rate.

For example, if you are on the 45% marginal rate of taxation, you will reduce your tax liability by 45% of the deduction amount - that is, R4500.

While this allowance will not apply to every taxpayer, it can be a useful way for salaried employees to reduce their tax liability.

Remember, however, that if the asset which has been subject to this allowance is sold at a later point, you may need to recoup past wear-and-tear allowances you claimed and add them to your taxable income.

  • Baines is the author of How to Get a SARS Refund and a tax consultant at Mazars