Losses are possibly expenditure
of an involuntary nature.
Joffe & Co (Pty) Ltd
1) Expenditure and Losses
Port Elizabeth Electric
Tramway Co Ltd
Edgars Stores Ltd
3) During the year of
assessment
Unconditional legal obligation needs
to be present.
Expense in dispute is only actually
incurred once the dispute has
been finalised.
Golden Dumps
Labat
Issuing of shares can't be
expenditure actually incurred.
Expenditure must be deducted in
the year of assessment that it is
incurred. It can't be claimed in
years thereafter.
Sub Nigel Ltd
Golden Dumps
Principle of matching does not
apply in tax
If expenditure is relating to or are
inevitable consequences of income
producing activities, it is deductible.
Port Elizabeth Electric
Tramway Co Ltd
Positive Test
Losses include losses of floating
capital.
If payment is happening due to an
uncertain future event, it can only
be actually incurred once
conditions are met (the future
date).
Nasionale Pers Bpk
2) Actually Incurred
Expenditure is voluntary payment.
Negligence that is not indicated to
be an inevitable consequence of
income producing activities, is not
deductible.
Joffe & Co (Pty) Ltd
BP Southern Africa
4) In the production of
income
Provider
If something is not a inevitable
concomitant of business
operations, it is not deductable.
Recurring payments used in the
production of income is deductible.
This includes royalty payments if
the intellectual property is used in
the production of income.
Expenditure in terms of a service
package are deductible.
Expenditure used to induce
employees is deductible.
Mobile Telephone Networks
Holdings (Pty) Ltd
Nemojin
Only fees incurred in the
production of income are
deductible.
If a dividend stripping scheme is
evident, the cost of shares portion
will not be deductable
New State Areas Ltd
5) not of a capital nature
When audit fees are dual
purposed it need to be
apportioned.
BP South Africa
Rand Mines
Expenditure regarded as costs of
performing income earning
activities = Revenue = Deductable
Expenditure regarded as
improvement and additions of
fixed capital = Capital = Not
Deductible
If an enduring benefit is created =
Capital = Non Deductible
Cost to create a capital
structure = Capital = Not
Deductable
Cost to work the capital
structure = revenue = deductible