Moving infrastructure to the cloud shifts a capital purchase into an operating subscription. The benefit is not a bigger tax deduction — it is the timing of that deduction and your cash. This tool models the difference under South African tax rules.
All amounts in ZAR, excluding VAT. Defaults are illustrative.
Both routes are fully deductible. You write off the entire cost either way — hardware as a wear-and-tear allowance under section 11(e) of the Income Tax Act (the periods are set out in SARS Interpretation Note 47), and a cloud subscription as an ordinary expense under section 11(a). The total deduction is essentially the same, so "go cloud and save tax" is the wrong headline.
The real difference is when the deduction and the cash land. Buying hardware spends all the cash today but releases the tax benefit slowly over the write-off period. Cloud spends as you go and deducts in the same year — and it ties up no capital. Discounting both after-tax cash-flow streams at your cost of capital captures that as a net present value.
A Small Business Corporation claiming accelerated 50/30/20 allowances under section 12E, a low discount rate, or cheap, long-lived hardware can all tip the result back toward Capex. Disposal is handled both ways: replacing hardware before it is fully written off releases the unclaimed tax value as a scrapping allowance under section 11(o), while a sale recovers prior allowances as a recoupment under section 8(4)(a) — a complication the cloud route avoids entirely. This tool will tell you when buying is the better call — that honesty is the point.