Page 239 - SAIT Compendium 2016 Volume2

IN 14 (3) Income Tax acT: InTeRPReTaTIon noTes IN 14 (3)
Result:
The full allowance of R7 000 for accommodation must be included in Y’s taxable income as he is unable to apply the actual method (see 5.3.2) and the deemed method (see 5.3.3) is not available for accommodation.
In relation to the allowance of R2 500 for meals and incidental costs, Y will be able to apply the deemed method to determine the amount he can deduct from the allowance. An amount of R1 818 (R303 per day as per the relevant Gazette x six days) is deemed to have been spent on meals and incidental costs. The balance of R682 (R2 500 – R1 818) must be included in Y’s taxable income.
Example 6 – Calculating the subsistence deduction if the employee’s expenditure exceeds the allowance granted
Facts:
A was granted an allowance of R5 000 for accommodation and R2 000 for meals and incidental costs during the 2013 year of assessment in order to conduct business-related activities on behalf of her principal. A was away from her usual place of residence for ve nights and six days. A spent R5 500 on accommodation and retained the supporting documentation. A was unable to prove any costs for meals or incidentals.
Result:
The actual method may be applied to determine the deduction available for accommodation, the deduction is limited to R5 000 even though A expended R5 500. Accordingly, the taxable portion of the allowance which must be included in taxable income is Rnil (R5 000 – R5 000). The additional R500 accommodation costs (R5 500 – R5 000) may not be deducted from the meals and incidental subsistence allowance of R2 000.
Under the deemed method A is deemed to have incurred R1 818 (R303 per day as per the relevant Gazette x six days) for meals and incidental costs for business purposes. Accordingly, the taxable portion of the allowance which must be included in taxable income is R182 (R2 000 – R1 818).
Example 7 – Reducing the deemed subsistence expenses if the employer bears a portion of the cost
Facts:
During the 2013 year of assessment B was required to travel within South Africa for business purposes. B spent ve nights away from home and returned home on the sixth day. His employer paid his hotel accommodation costs and breakfast costs. Guests at the hotel were not obliged to eat breakfast at the hotel but on the days they did the hotel would add the cost of the breakfast ordered to their hotel bill. B settled the hotel bill (accommodation cost R4 250 and breakfast R429) using his personal credit card and his employer subsequently reimbursed him.
The employer also paid B an allowance of R350 per day to enable B to pay for other meals and incidental costs. B received a total allowance of R2 100. B did not keep any supporting documentation for his expenditure on meals and incidental costs.
Result:
The reimbursement of R4 679 (R4 250 + R429) is not included in B’s taxable income.
The total amount deemed to have been actually expended on meals and incidental costs is R1 818 (R303 per
day as per the relevant Gazette x six days) less the breakfast expenditure of R429 borne by the employer by way of reimbursement. That is, R1 389.
Accordingly, the taxable portion of the allowance which must be included in taxable income is R711 (R2 100 – R1 389)
Example 8 – Bed and breakfast accommodation with a single charge for bed and breakfast
Facts:
During the 2013 year of assessment B was required to travel within South Africa for business purposes. He spent ve nights away from home and returned home on the sixth day. His employer paid his hotel accommodation. The hotel he stayed at provides bed and breakfast accommodation and levies a single inclusive charge irrespective of whether or not guests eat breakfast. B settled the hotel bill totalling R4 800 using his personal credit card and his employer subsequently reimbursed him.
The employer also paid B an allowance of R350 per day to pay for other meals and incidental costs. B received a total allowance of R2 100. B did not keep any supporting documentation for expenditure on meals and incidental costs.
Result:
The reimbursement of R4 800 is not included in B’s taxable income.
The total amount deemed to have been actually expended on meals and incidental costs is R1 818 (R303 per day as per the relevant Gazette x six days). The Gazetted amount does not need to be reduced for the cost of breakfast because with bed and breakfast accommodation the full charge levied by the service provider is considered to be a cost of accommodation.
Accordingly, the taxable portion of the allowance which must be included in taxable income is R282 (R2 100 – R1 818).
5.4 Deductions from travelling allowances and advances 5.4.1 General
This Note discusses the granting of an allowance or advance by a principal to a recipient for the use of a private motor vehicle for the principal’s business purposes, commonly known as a ‘travel allowance’. A
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