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Can The Cost Of Clothing Be Deducted For Tax Purposes?

Monday, 27 December 2010   (0 Comments)
Posted by: Author: Steven Jones
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Can The Cost Of Clothing Be Deducted For Tax Purposes?

If you’re selling it, the answer is "yes”. If you’re wearing it, the answer is "it depends”...

It’s interesting what people try to deduct for income tax purposes under the misguided belief that they fall within the "production of income” clause contained in Section 11(a) of the Income Tax Act.

However, SARS will (and has always) disallowed expenses incurred for the maintenance of a taxpayer. This question received from a reader illustrates the point yet again: "I have a client who is a debt counsell or and the sole member in the CC, and she's wanting to claim purchases made at clothing stores as part of her business expense, because she states that she needs to look presentable when seeing clients.Is this right, and where do we draw the line between business and personal expenses in this instance?

My response was as follows: "Unfortunately your client is trying something that has been tried many times before, without success.Section 23(1)(a) is clear in that it prohibits any deduction of expenses ‘incurred in the maintenance of any taxpayer, his (sic) family or establishment’. The requirement to ‘look presentable’ is inherent in any business, but the courts have held that this in itself falls into the category of private expenditure as contemplated in section 23(1)(a).

"The only way one can claim a deduction for clothing is if (a) it has been purchased for resale (e.g. a clothing store); (b) it is of a specialised nature (e.g. safety boots and hard hats purchased by a construction company); or (c) a uniform".

"Note that to qualify as a uniform, such clothing must be distinguishable from everyday clothing" (e.g. overalls with the name of the firm embroidered thereon).SARS has however been known to disallow so-called‘uniforms’ that resemble ordinary clothing but for the presence of an(extremely discreet) logo embroidered on the pocket.

"An exception to this rule is the one introduced for the 2010 World Cup, whereby replica supporters’ kit would not constitute a fringe benefit in the hands of employees(up to a once-off amount of R750). This applies only to the year of assessment within which the World Cup took place (2011 in the case of employees).It is presumed that the employer would be able to deduct the cost thereof as a business expense; however, the fringe benefit rules would apply to any employee who receives clothing costing more than R750 in aggregate during the 2011 year of assessment. (The definition of ‘employee’ includes directors of companies and members of CCs)”.

Source: By Steven Jones (Tax breaks)



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