Can a commission earner deduct work expenses?

Direct answer

Possibly. A commission earner can have a different deduction position from an employee who earns only fixed remuneration, but commission income does not make every work-related expense deductible. SARS says section 23(m) does not apply to an agent or representative whose remuneration is derived mainly, meaning more than 50%, from commission based on sales or turnover attributable to that person. At 50% or less, the restrictions continue to apply, subject to the limited deductions that section 23(m) specifically permits.

SARS's ITR12 guide specifically says that a commission earner who did not receive a travel allowance may claim qualifying travel expenses incurred in producing income if a logbook was kept. That is a focused rule, not a general right to deduct every trip, meal, device or personal cost.

What this means in practice

Start with the remuneration facts. Your employment contract, commission statements and IRP5 help show whether you earn commission, fixed salary, allowances or a mix. Those categories matter. A person who calls themselves a salesperson may not have the same deduction treatment as someone whose remuneration actually includes commission linked to work performance.

The more-than-50% test is material. SARS compares commission to gross remuneration and excludes non-taxable reimbursive allowances from that remuneration calculation. It is not a simple test of whether you earned any commission, and a 50/50 split is not enough. Where commission does not exceed 50%, do not assume a general section 11 expense claim will be considered. You may instead be limited to deductions expressly permitted for remuneration-related income.

There is a narrow normal-mainly-commission exception. SARS says that an agent or representative may still be outside section 23(m) where commission is below 50% in the relevant year but their remuneration is normally derived mainly from commission based on sales or turnover attributable to them. The taxpayer must retain proof that remuneration is normally mainly commission-based for five years after submitting the return. A bonus, incentive or another variable payment is not itself the stated commission exception.

Then identify each expense. A customer visit, a personal commute, a company-car trip, a phone contract and a home-office cost all need their own analysis. Private use is important. A receipt proves that money was spent, but not that it was incurred in producing commission income or that a deduction restriction does not apply.

Travel is often the most visible example. SARS requires a logbook for the commission-earner travel claim described in the ITR12 guide. The logbook should be contemporaneous and support the business kilometres and destinations. Do not substitute a calendar, a fuel receipt or an estimate for a proper logbook. Normal home-to-work travel should not be treated as business travel merely because you earn commission.

If you received a travel allowance or reimbursement, do not use this article to calculate the treatment. The allowance, reimbursement and commission-expense rules can interact, and their facts and records differ. Ask a practitioner to review the full remuneration package before you enter material expense claims.

Step-by-step

1. Confirm the remuneration structure.

Keep the contract, annual commission schedule, payslips and IRP5. Identify commission, fixed pay, allowances, reimbursements and employer-provided assets separately.

1. List each claimed expense.

Record the date, amount, supplier, purpose and connection to the income-producing activity. Separate personal, private or reimbursed expenditure from amounts you want considered.

1. Preserve original support.

Keep invoices, receipts, bank proof, employer approvals and expense claims. For travel, keep a complete logbook with the required trip details rather than rebuilding one at return time.

1. Check travel facts carefully.

Establish whether you received a travel allowance and whether the claimed travel was actually for earning commission income. For the ITR12 commission-travel field, SARS says the field unlocks where commission income is greater than zero and total commission exceeds 50% of total IRP5 income. A commission earner without a travel allowance still needs the logbook and qualifying facts.

1. Reconcile the records to the return.

Compare the claim to your IRP5 and prepopulated ITR12. Do not deduct a reimbursement again, and do not change employer certificate figures yourself to create a deduction.

1. Get advice on mixed cases.

Ask for tailored advice where income is partly salary and partly commission, expenses have private use, or a claim is significant. Keep the resulting calculation and advice with the ITR12.

Documents and records to keep

• Employment contract and commission plan.
• IRP5, payslips and annual commission statements.
• Invoices, receipts and proof of payment.
• Expense approvals and reimbursement records.
• Complete vehicle logbook where travel is claimed.
• ITR12, ITA34 and supporting calculation.

Important limits and exceptions

Commission status is not a substitute for a legal deduction test. The agent or representative, sales-or-turnover commission and more-than-50% conditions, the particular cost, any allowance and private use can all alter the outcome. A cost that is useful for your job can still be non-deductible. If total commission is 50% or less of relevant remuneration, section 23(m) restrictions can apply unless the documented normal-mainly-commission exception applies.

Do not claim commuting as business travel or estimate business kilometres after the fact. Do not use a deduction for a sole-proprietor business as authority for an employee commission claim. This guide also does not calculate vehicle deductions, home-office deductions or travel allowance treatment.

When to get tailored advice

Get tailored advice if your compensation includes a variable commission, travel allowance, company car, reimbursement or home office. You should also seek advice before claiming a large amount or if SARS asks for substantiation.

TaxProof can help put your contract, logbook and payment records into a clear file. A practitioner can advise on the actual deduction and SARS determines the assessment.

Related TaxProof guides

• Travel allowance and company car tax
• What work expenses can a holder of public office deduct? (B05-IND-003)

Sources

• SARS, Comprehensive Guide to the ITR12 Income Tax Return for Individuals
• SARS, Interpretation Note: Deductions and Limitations for Employees and Office Holders