This is the fourth in the series designed to help you fill in your income tax form, written for Personal Finance by Christo Henning, media liaison officer of SA Revenue Services. Remember your income tax return must be submitted by the extended deadline of June 30, 1997.
PART 3 (CONTINUED)
We have already discussed the other deductions in part 3 of the form. Now we look in detail at the sections covering entertainment and travelling allowances.
3.8 ENTERTAINMENT
Here you must give details of any expenditure incurred in providing hospitality of any kind. This includes:
* Expenditure incurred in providing or supplying food, drink or accommodation;
* Tickets or vouchers to the theatre, an exhibition, a club or to attend any type of performance; and
* Expenditure related to providing sporting, recreational or other facilities, as well as personal gifts, travel facilities, and vouchers for food, drink or accommodation and any incidental expenditure.
The allowable portion is the lesser of R2 500; or R300 plus five percent of whatever amount exceeds R6 000. For example, if the taxable income before deduction of the entertainment expenditure is R10 000 the maximum amount allowable is R300 plus R200 (five percent of R4 000) = R500.
3.9 TRAVELLING EXPENSES
WHERE NO ACCURATE RECORDS WERE KEPT:
If you receive a travelling allowance, you can claim for business travel for any kilometres travelled above 12 000 kilometres during the year but only up to a maximum of 32 000 kilometres.
If the vehicle has been used for less than 12 months of the year, the figures of 12 000 and 32 000 kilometres are reduced proportionately.
The first 12 000 kilometres are regarded as private kilometres and the kilometres travelled exceeding 32 000 would also be deemed as private.
(ALSO COMPLETE PART 10.4 OF YOUR RETURN)
If you receive a travelling allowance and during the year you used several vehicles for business purposes, one of which was not used primarily for business purposes, the method used to determine the deemed business travel will be applied separately to each vehicle which was not used primarily for business purposes.
To prove that any vehicle was primarily used for business purposes, you will have to keep an accurate record of total distance travelled and travel for business purposes and submit this record to your Receiver of Revenue when submitting your income tax return for the relevant tax year.
For example: You own three vehicles and receive an allowance for business travel expenses of R1 500 a month during the 1996 tax year. Details of the vehicles are as follows:
Vehicle A
Value R46 500
Distance travelled 16 000 km
Logbook - No record kept and the employee is unable to prove that the vehicle was used primarily for business purposes.
Vehicle B
Value R20 500
Distance travelled 11 000 km
Logbook - An accurate logbook has been kept showing 5 000 kilometres travelled for business purposes.
Vehicle C
Value R27 500
Distance travelled 17 000
Logbook - No record kept and the employee is unable to prove that the vehicle was used primarily for business purposes.
SOLUTION:
Vehicle A
Fixed cost element according to Schedule A - R22 235
Fixed cost element per kilometre is R22 235/16 000 = 139 cents
Total kilometres travelled 16000
Kilometres deemed for private purposes 14000
Kilometres deemed for business 2 000
Fixed cost element (2 000 X 139 cents) R2780
Fuel and maintenance elements 770
Business expenditure R3550
Vehicle B
Fixed cost component according to Schedule A - R12 389
Fixed cost a kilometre is R12 389/11000 = 113 cents
Total kilometres travelled 11 000
Kilometres according to logbook, for business 5 000
Kilometres for private purposes 6 000
Fixed cost element (5 000 X 113c) R5 650
Fuel and maintenance elements R1 800
Business expenditure R7 450
Vehicle C
Fixed cost element according to Schedule A - R14 661
Fixed cost per kilometre is R14 661/15000 = 97.7 cents
Total kilometres travelled 17 000
Kilometres deemed for private purposes 14 000
Kilometres deemed for business3000
Fixed cost element (3 000 X 97.7c) R2 931
Fuel and maintenance elements R1 095
Business expenditure R4 026
Allowance received (R1 500 X 12) R18000
Less:
Business expenditure
A R3 550
B R7 450
C R4 026
R15026
Taxable amount R2 974
WHERE ACCURATE RECORDS WERE KEPT
In all cases, if you have kept accurate records of distances travelled for business purposes, you will be entitled to use the actual figures in determining the distance travelled for business purposes.
However, a copy of the relevant records must be submitted to your Receiver of Revenue in support of your claim when submitting your income tax return for the relevant tax year.
(ALSO COMPLETE PART 10.3 OF RETURN)
The wear and tear allowance must be calculated at a rate of 20 percent a year on the reduced value of the vehicle at the beginning of the year of assessment.
Where a motor vehicle was acquired during the year, wear and tear will be allowed pro rata.
IMPORTANT: Travelling between your residence and place of employment is private travelling. If you received a travelling allowance, the deduction may not exceed the allowance received.
3.10 OTHER DEDUCTIONS
State the nature of the expenditure claimed if not covered by parts 3.1 to 3.9.