Page 244 - SAIT Compendium 2016 Volume2

IN 14 (3) Income Tax acT: InTeRPReTaTIon noTes IN 14 (3)
5.5 Deduction under section 11 (a)
Section 23 (m) generally prohibits employees and of ce holders from claiming a deduction for business-related travel expenditure under section 11 (a).
There are limited circumstances, for example, an agent or representative whose remuneration is mainly derived from commissions based on sales or turnover, who are not automatically prohibited by section 23 (m) from deducting business-related travel expenditure under section 11 (a).*
Taxpayers who are not subject to section 8 (1), for example, an independent contractor (see 5.1.1), may seek to claim business-related travel expenditure under section 11 (a). In this regard the calculation of the deduction available, assuming all the requirements of section 11 (a) are met, must be based on actual expenditure and actual business kilometres travelled. Taxpayers seeking to claim a deduction bear the onus of proving that the amount is deductible† and, if required, will need to produce proof of the expenditure incurred and the business kilometres travelled. See 5.4.2 for details on what SARS considers to be accurate written records of business kilometres travelled. A method which merely regards, for example, 20% of total travelling expenses as private is not acceptable. Practice Note No. 24‡ has been withdrawn with effect from years of assessment commencing on or after 1 March 2010.
6. Employees’ tax
6.1 General
All allowances or advances, except for those discussed in 6.2 and 6.3,§ required to be included in taxable income under section 8 (1) (a) (i) must be included in remuneration for the purposes of employees’ tax. Reimbursement of actual expenditure is not subject to employees’ tax.
6.2 Subsistence allowances
Subsistence allowances are generally not subject to employees’ tax. However, if a subsistence allowance or advance is paid or granted to an employee during any month, and that employee had not spent the anticipated time away from his or her usual place of residence on business by the end of the month following the month in which the allowance or advance was paid or granted, it will be subject to employees’ tax if the employee has not refunded such amount to the employer. This ensures that subsistence allowances or advances are not used as a form of salary structuring by employers and do not result in employees receiving a tax-free allowance which is not provided for by legislation.
The amount of the allowance must be included in remuneration in the month following the month in which the allowance or advance was paid if the employee did not spend the time away from home as anticipated.
6.3 Travel allowance and reimbursive travel claims
6.3.1 Travel allowance
The de nition of the term ‘remuneration’ in the Fourth Schedule to the Act was amended with effect from 1 March 2010 to include 80% of the travel allowance or advance as remuneration. However, in the event that an employer is satis ed that at least 80% of the use of the motor vehicle for a year of assessment will be for business purposes, only 20% of the travel allowance or advance is included as remuneration and is subject to employees’ tax.¶
This does not mean that only a portion (80% or 20%, as the case may be) is subject to tax. The full allowance or advance is potentially taxable if the taxpayer is unable to claim a suf cient deduction for business travel when submitting his or her annual tax return. It is only for the purposes of employees’ tax that 80% or 20%, as the case may be, is included in remuneration.
Employers must be satis ed that at least 80% of the use of the vehicle is for business purposes when assessing whether 80% or 20% of the travel allowance or advance should be included in ‘remuneration’. The word ‘satis ed’ suggests that the employer must actively look into the facts of each employee’s circumstances and objectively weigh up and determine whether or not the employee should qualify.
Employers must satisfy themselves that employees will use their vehicles for at least 80% business use. This can be done by –
• regularly reviewing employees’ logbooks which detail business and private travel; and • taking into consideration changes in the roles or functions of the employees.
* Taxpayer’s in these circumstances will need to consider the interaction between sections 8 (1), 11 (a), 23 (m) and 23B.
† Section 102 of the Tax Administration Act 28 of 2011.
‡ ‘Income Tax - Private Use of a Motor Vehicle’ (issued on 8 August 1994) – this note previously dealt with the determination of the private use of a motor vehicle.
§ The employees’ tax consequences are also different for the holder of public of ce allowances – these are not discussed in this Note.
¶ Effective years of assessment commencing on or after 1 March 2011.
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