Commission-based income can be extremely rewarding, but it also comes with unique tax responsibilities in South Africa. If you earn most of your income through commissions, the South African Revenue Service (SARS) treats you differently from normal salaried employees.

The good news? Commission earners can claim far more deductions than regular employees. The challenge is understanding what expenses are allowed, how tax directives work, and what you must do at the beginning of each tax year (1 March).

This guide explains everything commission earners in South Africa need to know.

What SARS Considers a Commission Earner

A taxpayer is regarded as a commission earner if more than 50% of their total remuneration comes from commission income.

This means:

• Your commission income must exceed 50% of total earnings
• Total remuneration includes
  • Basic salary
  • Commission income
  • Employer contributions (medical aid, retirement funds, etc.)

When this threshold is met, SARS allows you to claim expenses incurred in producing that income, similar to deductions allowed for small businesses.

Examples of professions commonly paid by commission include:

• Insurance brokers
• Financial advisors
• Property agents
• Vehicle sales executives
• Independent sales representatives

Fixed Percentage Tax Directive (Very Important)

Commission income can fluctuate dramatically month-to-month. Because of this, many commission earners apply for a Fixed Percentage Tax Directive from SARS.

What Is a Fixed Percentage Tax Directive?

A tax directive is an official instruction from SARS to your employer that determines how much PAYE tax must be deducted from your income.

For commission earners, this usually means:

IRP3(b) – Employees’ tax deducted at a fixed percentage.

Instead of tax being calculated differently every month, SARS instructs your employer to deduct a fixed tax percentage from your commission income.

Why This Directive Is Important

Benefits include:

✔ More predictable monthly tax
✔ Less risk of a large tax bill at year-end
✔ Better cashflow management

A fixed percentage directive helps normalise tax payments when income fluctuates.

When Should You Apply?

Most tax practitioners recommend applying at the beginning of the financial year (1 March).

Why?

• It ensures correct PAYE deductions throughout the entire tax year
• Prevents large underpayments or tax debt

Applications are typically submitted via SARS eFiling by the taxpayer or their tax practitioner.

SARS Rules for Deducting Expenses

For an expense to be deductible, it must meet these requirements:

✔ The expense was actually incurred
✔ It was incurred in the production of income
✔ It is not capital or private in nature

These rules come from Section 11(a) of the Income Tax Act.

If these criteria are met, the expense may be claimed against commission income.

Expenses Commission Earners Can Claim

Commission earners may deduct a wide range of business-related expenses, including:

Travel and Vehicle Expenses

If you use your personal vehicle for business:

You may claim:

• Fuel
• Vehicle insurance
• Vehicle finance interest
• Maintenance and repairs
• Tyres
• Depreciation (wear and tear)

However:

✔ You must keep a logbook
✔ Only business kilometres may be claimed

Communication Costs

You may deduct business-related:

• Mobile phone usage
• Internet costs
• Data packages

These must be proportionally allocated between private and business use.

Marketing and Sales Expenses

Many commission earners spend heavily on generating leads.

Deductible expenses include:

• Advertising
• Sales promotions
• Client entertainment
• Networking events

Sales-related entertainment is specifically allowed for commission earners but not for normal salaried employees.

Professional and Administrative Fees

Examples include:

• Accounting fees
• Legal fees
• Administrative support
• Sales support services
• Marketing agency costs

Home Office Expenses

If you work from home and meet SARS requirements, you may claim:

• Rent or bond interest (portion)
• Electricity
• Cleaning
• Office maintenance

These expenses must be calculated on a proportional basis based on the office space used.

Office and Equipment Costs

You may claim expenses for:

• Laptop and computer equipment
• Office furniture
• Stationery
• Printer supplies

Large assets may be deducted over time through wear-and-tear allowances.

Record Keeping Requirements

SARS requires proper documentation for all claims.

You should keep:

📁 Invoices
📁 Receipts
📁 Bank statements
📁 Vehicle logbook
📁 Expense schedules

Records must generally be kept for at least five years in case of a SARS audit.

Common Tax Mistakes Commission Earners Make

Many commission earners pay too much tax because they:

❌ Do not apply for a tax directive
❌ Fail to claim allowable expenses
❌ Do not keep receipts
❌ Forget to track travel logbooks

Proper tax planning can significantly reduce your tax liability.

Final Thoughts

Commission earners in South Africa have unique tax advantages, but they also carry additional responsibilities.

If more than 50% of your income comes from commission, you may claim a wide range of business-related expenses, including travel, marketing, home office costs, and professional fees.

Applying for a Fixed Percentage Tax Directive at the start of the financial year (1 March) can also help stabilise your tax payments and prevent unexpected tax liabilities.

If you’re unsure about your deductions or directive application, consulting a tax practitioner can help ensure you remain fully compliant with SARS while minimising your tax burden.

🏡 A Deal Months in the Making — Before the Commission Finally Pays

Thabo is an estate agent in Pretoria who lists a family home for R2 million. For three months he pays for fuel to host weekend show houses, prints flyers, runs Facebook property ads, and spends evenings answering buyer enquiries. After countless viewings and negotiations, the property finally sells. At a 6% commission, the sale generates about R120 000 in commission (plus VAT) — which is within the typical South African range of about 5% to 7.5% of the sale price. However, the commission is shared with the agency and only paid once the property transfer is completed. By the time the money reaches his account, months have passed and Thabo has already covered most of the marketing and travel costs himself — a reality many South African estate agents know all too well when working on a commission-only income.

💼 Commission Income Comes With Real Costs

For many South African estate agents, months of work happen before a single commission is paid. Agents often spend their own money on fuel, advertising, and show houses while marketing a property. When the property eventually sells, the commission — typically around 5% to 7.5% of the sale price plus VAT — is only paid once the transaction is completed and registered. This makes proper expense tracking and tax planning essential so agents don’t end up paying more tax than necessary.