Tax and SARS knowledge base
Can a partner claim expenses paid personally for the partnership?
Can a partner claim expenses paid personally for the partnership?
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Direct answer
A partner should not claim an expense personally only because the partner paid the supplier. SARS states that partners are taxed on their shares of partnership profits, while the general trade-expense test still applies to a claimed cost. The agreement, accounting records and underlying invoice must be reviewed before deciding how the payment affects a partner's return.
The fact that a personal card or bank account was used is evidence of payment, not proof of a personal tax deduction. The same expense should not be claimed in the partnership records and again on the partner's individual return. Prepare the accounting position first, then use the current ITR12 workflow.
What this means in practice
Partners sometimes pay suppliers from personal funds. That payment fact alone does not determine a deduction, a reimbursement or a contribution. A vague description such as "partner expense" is not enough: retain the agreement, invoice, payment proof and partnership accounting records for a professional review.
Start by identifying who contracted with the supplier and the exact commercial purpose. Keep the invoice, proof of payment and a link to the partnership activity. Then check whether the partnership has already recorded the cost, repaid the partner or treated it as drawings or capital. A reimbursement is not something to ignore. It can change the partner's final economic position and the accounting records.
Mixed costs are particularly risky. A partner's private phone, vehicle, home, travel or legal bill might partly relate to the partnership, but that does not permit an estimated claim without evidence. Ask for an itemised invoice where possible, keep a credible split and obtain tailored advice if the amount is material.
Step-by-step
- Identify the payer and the obligation.
Keep the supplier contract, invoice, order and proof that the partner paid. State why the expense related to the partnership.
- Review the partnership agreement.
Check rules for contributions, reimbursements, authority to incur costs and profit-sharing.
- Reconcile the partnership books.
Establish whether the cost is already in the accounts, whether an amount is owing to the partner and whether it has been repaid.
- Remove private elements.
Separate personal use and capital items. Do not use a convenient percentage created at filing time.
- Prepare a written allocation.
Explain the chosen accounting treatment, the evidence and how it affects each partner's allocated result.
- Review the return entries.
Use the current ITR12 guide and keep the workpapers with the final return. SARS asks taxpayers to retain supporting documents for at least five years.
Documents and records to keep
- Partnership agreement and any resolution approving the expense.
- Supplier invoice, contract, order, proof of partner payment and reimbursement evidence.
- Partnership ledger, bank reconciliation and annual accounts.
- Evidence supporting any business-private split.
- A schedule showing the effect on the partnership result and each partner's share.
- Final submitted returns and assessments.
Important limits and exceptions
This article does not decide the tax treatment of a specific cost. SARS's general trade-expense principles still apply, and a cost can be capital, private, mixed, not sufficiently connected to trade or otherwise subject to a separate rule. It also does not deal with VAT input-tax entitlement, employee expenses, loans between partners or a disputed partner account.
Avoid inconsistent entries. If the partnership records and an individual return point to different treatments of the same invoice, pause and obtain advice before filing. Correct unclear records rather than assuming a return description resolves the issue.
When to get tailored advice
Get advice for asset purchases, vehicles, home-office costs, legal fees, repayments, large reimbursements, partner disputes or expenses paid in a different tax year. TaxProof can organise the evidence schedule, but a qualified adviser should confirm the tax treatment.