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Summary Special Deductions
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This document provides a detailed summary of the Special Deductions dealt with in the Tax Legislation
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LML4804 PORTFOLIO MEMO - MAY/JUNE 2023 - SEMESTER 1 - UNISA - (DETAILED ANSWERS - DISTINCTION GUARANTEED!)
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Exempt Income
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Prohibited Deductions
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Special Deductions:Chapter 12 SILKE
S11(c) Legal 1. Examples of legal expenses:
expenses Legal practitioners
Expert advice/ evidence
Court fees
Witness fees
Sheriffs/ messengers of the court.
2. Actually incurred:
Look at General Deduction implications/ case laws.
3. Claim, dispute, action at law:
Does not have to be at court.
4. Arising in course of ordinary operations of carrying trade:
No requirement for it to be in the production of income (as required
under General Deduction).
5. Provisos:
Not of capital nature
If claim made against taxpayer (PAY)and the taxpayer loses
court case – the deduction will be tested under s11(a)
If claim made by (RECEIVE) taxpayer – GI will be tested
under court cases. If capital in nature = not deductible.
S11(cA) Restraint of Applicable to:
trade Natural person
Labour broker
Personal Service Provider.
Only deductible if included in GI under (cA) and (cB) inclusion under
employee’s taxable income.
Amount deductible is lessor of:
(1/3 of pmt)
(Pmt/ nr of years of restraint but may not be less than 3
yearsC)
NB!! NO apportionment.
If 3.5 years = deduct using 4 years.
Consider s23l
S11(d) Repairs ‘Repairs’ not defined court cases.
Maintenance costs
Restoration by renewal.
Replace something that was previously broken.
Should not increase our income earning capacity.
Occupied for purpose of trade.
OR
, From which income is receivable – e.g rent property. Must still incur
expense.
S11(e) Wear and tear Discussion found in capital allowance summary
S11(f) Lease Lessee perspective!!
premium
Premium is paid by taxpayer (lessee) for the right of use of:
Land or buildings
Plant or machinery
Motion picture film
Patent/ design/ trademark
Providing knowledge
Pipeline / transmission line/ railway line
Line or cable
Must be in production of income.
Allowance: premium (amount actually incurred) /(total period in use
Limited to 25 years or 10 if cables) x years brought into use.
Apportioned in terms of months occupied
S11(g) Leasehold Requirements:
improvements Expenditure actually incurred by taxpayer.
Enforced by leasehold agreement.
Undertake improvements on land and buildings.
Used or occupied for production of income.
Allowance:
cost limited to amount stipulated in contract/ period available for
use – period taken to complete improvements (max 25 years).
Excess amount
(Amount spent > contract):
Manufacturing building – s13 allowance on excess.
Any other case – add to BASE COST of improvement.
Lessee spends > amount in contract = excess gets allowance.
Lessee spends < amount in contract = limited to amount spent
(Whichever is lower)
Apportioned in terms of months improvements were completed.
What if lease is terminated early?
IN109 claims we can get normal s11(f) allowance but unclaimed
portion is forfeited.
S11(h) Improvements For lessor: was included in par (h) of GI definition.
included in
par (h) of GI
definition
S12N Deduction for TRIGGER!! Lessor is EXEMPT entity (e.g government)
improvements Implications for lessee: Rental still deducted under s11(a), but no
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