Are You Using Company Money for Personal Expenses? Here's What You Need to Know.

When a director or shareholder uses company funds for personal expenses, it usually creates a debit loan account — in other words, money owed back to the company. This is common in smaller businesses, but if it is not managed properly, it can create avoidable tax and compliance issues.

Here is why it matters — and what to do about it.

What Exactly Is a Debit Loan Account?

In practice, this happens when money is taken from the business outside of salary, dividends, or legitimate business expenses. It shows in the records as a loan owed by the individual to the company.

That is where the tax risk starts.

An Important Tax Consideration: Deemed Dividends and SARS Scrutiny

If the loan is interest-free or below the official rate, the shortfall can trigger a deemed dividend and Dividends Tax. SARS currently levies Dividends Tax at 20%, and interest-free or low-interest loans can also create additional tax consequences depending on the facts.

Common ways to deal with it include:

– Repay the loan promptly.

– Regularise it through salary or a dividend, where appropriate.

– Charge interest at the official rate where needed. The current official rate is 8% from 1 June 2026.

A recent Tax Court matter, [Taxpayer D v CSARS](), reinforced how important proper records are. Where loan account movements cannot be explained, SARS may treat them as undeclared income and impose additional tax, penalties, and interest.

Why It Matters

Debit loan accounts can affect tax, payroll, and cash flow. They can also become problematic if the balance grows over time or is not supported by proper documentation. The main takeaway is simple: if company money is used personally, make sure the treatment is clear and reviewed regularly.

How to Protect Your Company (and Yourself)

1. Keep proper records — every advance should be clearly recorded.

2. Review the balance regularly — not only at year-end.

3. Resolve it early — through repayment, salary, dividends, or interest where appropriate.

4. Get advice before year-end — small issues are easier to fix early.

Conclusion: A Useful Tool That Needs Proper Management

Debit loan accounts are manageable, but they should never be left informal for too long. A quick review now can help avoid bigger tax and compliance issues later.

If you are unsure how a loan account is being treated in your business, it is worth getting it checked sooner rather than later.

This article is for informational purposes and does not constitute tax advice. Rules can change; always verify with a qualified specialist.