Dear reader,

in this bulletin:

• Their advice is costing their clients
• My advice to the unfortunate group of individual tax payers…
• My advice to all the members and shareholders/directors of CC’s and/or Companies…

I’m not sure I agree with the advice some auditors and tax experts are dishing out to help their clients to get around the travel allowance rules. Their clients used to get a travel allowance, but don’t want the hassle of keeping a logbook now. And they’re suggesting that these clients cancel their employees’ travel allowances, and simply add these travel amounts to the employees’ salaries instead. But this is when they’ll pay more income tax!

 Their advice is costing their clients!

 I’ve also come across numerous smaller CCs and companies where the members and shareholders/directors never claim for traveling for business purposes. I think they’re losing out on potential tax savings…

 Wouldn’t it be great if for every kilometer you’ve traveled, SARS would effectively contribute a maximum of R1.17 per kilometer - meaning you could deduct a maximum of R23 360 from your taxable income and save a maximum of R9 344 in tax!

 My advice to the unfortunate group of individual tax payers…

 … who DON’T intend to continue keeping a travel allowance as part of their standard salary package, is this:

• Estimate all the business travelling you’ve done in the past year (even if it’s just driving from the office to the post office and back) for which you haven’t been reimbursed.

• Take the estimated kilometres and multiply them by R2.92. Divide the result by 12. This gives you the monthly amount you could earn TAX FREE by claiming a reimbursive travel allowance from your employer.

Remember: For you to earn this amount tax free you will have to submit — at least on a monthly basis — a travel claim form to your employer. The maximum number of kilometers you can claim per year is 8 000, meaning an average of 666 kilometers per month.

 My advice to all the members and shareholders/directors of CC’s and/or Companies…

 … who have never bothered to claim a reimbursive travel allowance, is to instruct one of your employees, on a monthly basis, to go through his diary and to complete a travel claim form on your behalf. Yes, you can claim travel from your own CC/Company.

 Obviously the person doing the work will have no idea how many kilometer they’ve travelled for business purposes but there’s even a solution for that little issue. Most of the GPS devices can calculate kilometer distance from one location to another, or alternatively there are great websites which provide the means to calculate the kilometers FOR FREE. For example:

•          www.brabysmaps.co.za
•          www.shellgeostar.co.za

The maximum rate SARS allows is R2.92 per kilometer and unfortunately you’re limited to 8 000 kilometers per year.

Most of my clients claim 8 000 kilometers a year; they don’t claim any excess kilometers travelled. . At least they can deduct R23 360.00 from their taxable income and save R9 344.00 in taxes.

The good news is that travel allowances are not all lost - although it does require a little bit of admin. 

Until next time,

Prof Marius Maritz

Editor in Chief, Practical Tax Handbook