A taxpayer has two IRP5's both with commission earnings but the total commission earned is slightly less than 50% of the two certificates combined, gross taxable income [3699]. The first IRP5 is 98% commission of total taxable income earned for 6 months.
Author: the Payroll Authors Group of South Africa
Important:
This answer is based on tax law year ending 28 February 2021.
Answer:
The limitation prescribed in section 23(m) of the Income Tax Act, clearly indicate that a deduction will be limited unless the remuneration is MAINLY in the form of commission based on sales or turnover attributed to the individual.
The work “mainly” used in this section means more than 50% of the total income of the individual.
Therefore all income must be added together in order to determine if the commission portion of the income exceeds 50% of the total.
Although the above limitation will be applicable, the individual will be allowed to claim certain home office expenses.
Please refer to Interpretation note 13 (explaining the limitation and what deductions will be allowed) as well as Interpretation Note 28 (explaining what home office expenses will be allowed).