The downside of receiving a travel allowance is that at the end of the tax year, you could have a tax problem.
Continuing the series on filling in your annual income tax return, this week looks at the complicated travel allowance deduction.
It is a popular fringe benefit for using your car for business travel, but each month you are taxed35 percent of this allowance.
In your tax return though, the full allowance is included in your gross income but you claim, as a deduction, the cost of using your car for business purposes. If this cost is less than 65 percent of your allowance you'll end up paying additional tax on assessment.
There are four methods of calculating your business travel costs.
The taxpayer's golden rule is to calculate the cost, using each of the four methods, and to go for the one giving the highest cost.
However, your choice may be restricted if you do not have a log book recording details of your business and private mileage during the year, and/or a record of your expenses.
Remember the crux of this deduction is to work towards a cost per kilometre multiplied by the number of kilometres (km) you travelled for business purposes.
No matter which cost method you use, you have to submit your car's odometer readings at the beginning and end of the tax year, as this determines the total km travelled.
OPTION ONE
Actual business km travelled (per your log book) multiplied by your actual car expenditure (per your records). You can include expenses like running and maintenance costs, insurance, license, and a wear and tear/depreciation allowance. If you lease your car, replace wear and tear with your lease payments.
OPTION TWO
Business mileage multiplied by your actual expenditure (per records). This is calculated as follows: from your total distance travelled (calculated from your odometer readings) deduct 12 000 km (private usage).
The difference is your business mileage, which cannot exceed 20 000 km.
OPTION THREE
Business mileage multiplied by the taxman's schedule of costs. Calculate the business mileage as above, and your expenses from the taxman's schedule.
The schedule gives you a fixed fuel and maintenance cost according to the cash value of your car (including VAT).
OPTION FOUR
Actual business mileage (per your log book) multiplied by the taxman's schedule of costs.
Other pointers on the travel allowance:
* If your business mileage is less than 8 000 km, calculate your business cost as 126c times your business km travelled (provided no other reimbursive allowance was received).
* If you received an allowance for part of the tax year, take this into account.
* Business costs cannot exceed an allowance.
* If your employer bears costs like petrol and maintenance, these amounts should be included in your travel allowance.