Quote Originally Posted by Houses4Rent View Post
Net rental income is rental income less all deductible expenses like, bind interest, levies, agent fees, repairs etc.

He cannot deduct expenses twice.
I've since thought about John's issue in more detail, and thanks you your post, I realised that I've misunderstood income tax returns ever since I first started doing them a couple of years ago (it's a bit embarrassing, yes). For some reason, I always thought that deductions came straight back from the amount of tax that a taxpayer paid during the tax year.

My understanding (nonsensical, in hindsight) was as follows:
John earns R100 000 p/a.
John pays R10 000 tax p/a.
John claims R5000 as deduction.
John gets R5000 back out of the tax that he has paid (bringing his total tax paid down to R5 000).

Now that I'm enlightened, I understand it as follows:
John earns R100 000 p/a.
John pays R10 000 tax p/a.
John claims R5 000 back as deduction.
John's tax is recalcuted on a taxable income of R95 000 (let's say it's R1 000 less tax).
John gets R1 000 back (bringing his total tax paid down to R9000).

Because I had misunderstood how this actually works, John can't actually claim the total value of his expenses back from SARS (R58 800 in the original example) - the amount that he can get back would be significantly less, so it seems that John would actually be better off putting his capital straight into his bond.