Tax and your motor vehicles expenses explained
Many of you will have had some kind of hiccup when it comes to Motor Vehicle Expenses on your Income Tax Assessment. In most cases, this is due to a failure to provide a logbook in support of your claim for these expenses.
Before we examine this requirement, let’s take a look at which taxpayers can claim these business-related Motor Vehicle Expenses – and how they can do so.
A taxpayer who receives a Travel Allowance as part of their remuneration package
A Travel Allowance is only awarded to an employee – and so the onus is on the employee to justify the business kilometres that they travel. Please note: private kilometres travelled include the distance between the employee’s residence and their place of work.
In this instance, the taxpayer will be entitled to a Travel Deduction and will be able to claim the greater of:
– business kilometres multiplied by a deemed rate (see tables)
– the proportion of business kilometres to total kilometres multiplied by actual expenditure (wear & tear included)
A taxpayer who is a sole proprietor (i.e. owner of the practice) or in partnership with others
Apart from having to keep accurate records for both business kilometres travelled and actual expenditure, it is important to note that:
– the amount of expenditure must have been actually incurred;
– the expenditure must not have been capital in nature; and
– the expenditure must have been wholly and exclusively incurred in the production of income.
In this instance, the taxpayer can only claim the proportion of business kilometres to total kilometres multiplied by actual expenditure (wear & tear included).
A taxpayer who uses an employer-owned vehicle
For the employee, the use of an employer-owned vehicle attracts a fringe benefit of 3, 5% per month of the determined value (defined) of the vehicle. Where the vehicle is subject to a maintenance plan (defined), the monthly fringe benefit is 3, 25%.
The employee can claim the proportion of business kilometres to total kilometres multiplied by the fringe benefit as a deduction on Assessment.
Where the employee bears the full cost of fuel for private kilometres travelled, there is a reduction of the fringe benefit for the private kilometres travelled multiplied by the deemed rate applicable to fuel cost (see tables).
Furthermore, if the employee bears the full cost of one or more of the licencing/insuring/maintaining costs, then there is a reduction of the fringe benefit for the proportion of private kilometres travelled to total kilometres multiplied by each such cost.
The requirement to keep a credible logbook
A credible logbook implies that a logbook cannot be done retrospectively – i.e. it must be completed and updated continuously throughout the year.
As an absolute minimum, the abovementioned taxpayers must keep accurate written records of their business travel and include the following:
- Odometer reading at the beginning of the tax year
- Odometer reading at the end of the tax year
- For all business travel:
- Date of travel
- Kilometres travelled
- Business travel details (where and reason for trip)
Whilst use of an Excel spreadsheet to record these travel details is highly recommended, your attention is drawn to a logbook designed by SARS which is available on the SARS website.
Get the most out of your Motor Vehicle Expenses claim
Would you like to learn more about managing your Motor Vehicle Expenses and avoid the stress and confusion of an incorrect or incomplete claim? The professional team at Vizibiliti Management Services can offer you valuable insights and advice to streamline this process. Get in touch with us today.
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BY ALISON MAYTHAM
“There are many different factors that determine the success of your practice – but, as a busy healthcare professional focusing on the needs of your patients, you may not always have the time to focus on the many demanding, and often complex, facets of managing your business. Vizibiliti provides you with easy access to insightful, comprehensive practice and business management solutions and advice across all stages of your business journey – from establishing, growing or closing your practice.”