Page 237 - SAIT Compendium 2016 Volume2

IN 14 (3) Income Tax acT: InTeRPReTaTIon noTes IN 14 (3) for further detail) is equal to the amount of the reimbursement, but if the amount of the allowable deduction is less than the
amount of the reimbursement, then a net inclusion in taxable income will be required (see Example 12 in 5.4.4).
5.3 Deductions from subsistence allowances 5.3.1 General
A recipient may only deduct subsistence-related expenses from the subsistence allowance granted by the principal if the recipient is obliged to spend at least one night away from his or her usual place of residence in the Republic by reason of the duties of his or her of ce or employment.
A recipient who meets these requirements is allowed to deduct the amount actually expended on accommodation, meals and other incidentals during that period. Section 8 (1) (c) speci es two methods to calculate the amount which is deemed to have been actually expended on accommodation, meals and other incidentals, namely, an actual method or a deemed method (see 5.3.2 and 5.3.3).
By reason of the duties of his or her of ce or employment
The reason the recipient is away from home must be related to the recipient’s of ce or employment.
Example 4 – By reason of of ce or employment
Facts:
At the request of his employer, A attended a two-day conference in a wine-making region. The conference started on a Thursday. A’s employer paid A’s accommodation for Thursday night and gave him a subsistence allowance for two days. Instead of driving home after the conference A decided, at his own expense, to extend his stay and spend the weekend exploring the area for potential wedding locations and tasting local wines.
Result:
A will be entitled to deduct the subsistence-related expenses for the period related to the conference from the allowance received from his employer. As the reason for spending the additional time away from home is personal and not work-related, A will not be entitled to deduct the subsistence-related expenses related to the period after the conference from the allowance
Obliged to spend at least one night away from his or her usual place of residence in the Republic
The word ‘night’ is not de ned in the Act and, according to the rules of interpretation of statutes, must be given its ordinary grammatical meaning. The Concise Oxford English Dictionary* de nes ‘night’ as ‘the time between sunset and sunrise’. The Collins English Dictionary† de nes the word as ‘the period of darkness each 24 hours between sunset and sunrise.
Therefore, in order to qualify to deduct subsistence expenses under section 8 (1)(a) (i) (bb), the recipient of a subsistence allowance must be away from his or her usual place of residence in the Republic for at least one full period from sunset of one day to sunrise of the next.
In ITC 1668‡ employees who lived relatively far from their place of employment were paid an accommodation allowance, for example, an employee who worked in Vanderbijlpark but whose family lived approximately 360 km§ away in Bloemfontein received an allowance. Van Dijkhorst J drew a distinction between an employee who chooses to live so far from his or her place of employment that he or she needs to nd accommodation closer to his or her place of employment versus an employee whose duties require spending night/s away from home (for example, working overtime or working on a project in a location which is not the normal of ce location). In the rst situation the new accommodation would become the employee’s usual place of residence and no deductions would be available under sections 8 (1)(a) (i) (bb) and (1)(c). In the latter situation the employee’s work duties necessitate that on a temporary basis the employee spends time away from home and, assuming all the other requirements are met, the employee would be entitled to a deduction.
5.3.2 Actual method
Under the actual method the amount the recipient is deemed to have actually expended is equal to –
• the amount he or she proves to the Commissioner was actually incurred;
• for accommodation, meals and other incidentals;
• excluding any amount of expenditure borne by the employer (otherwise than by way of the allowance
or advance); but
• limited to the amount of the allowance or advance granted to meet these expenses.¶
In order to be able to prove the amount of expenditure the recipient will need to obtain and retain supporting documentation (for example, invoices and receipts) for the expenditure incurred. The supporting documentation must be kept for ve years from the date when the income tax return, which included the claim for the deduction, was received by SARS. The documentation is not submitted with the income tax return but the recipient must be able to produce such documentation upon request by SARS.
An employer will be considered to have borne the expenditure if –
* Concise Oxford English Dictionary. Edited by Catherine Soanes, Angus Stevenson. 11th Edition Revised. New York: Oxford University Press, 2006.
† Collins English Dictionary. 3rd Edition. Glasgow: Harper Collins, 1991.
‡ 61 SATC 445.
§ http://www.saexplorer.co.za/southafrica/distance/travel_distance_calculator.asp?Region= south _africa [13 March
2012].
¶ That is, the amount of the deduction may never exceed the amount of the allowance.
saIT comPendIum oF Tax LegIsLaTIon VoLume 2 229