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DRD CONSULTING E-MAIL NEWSLETTER 1 October 2019 www.drdconsulting.co.za

Order a Custom Combined Company Register and Minute Book (R550) and receive 1 FREE share certificate valued at R150

The Companies Act 71 of 2008 requires ALL companies to maintain their company records. Contact us for more information; [email protected]

From the desk of Dot Schafer CA (SA):

HOW YOUR SARS TRAVEL ALLOWANCE WORKS

A travel allowance should only be granted to employees who travel for business purposes and it is granted to finance a portion of an employee’s business travel cost.

Many payroll professionals, however, struggle to come to grips with the South African Revenue Service’s (SARS) travel allowance reporting /declaration, and employees feel the pinch at assessment for not maintaining accurate records of their business travels, says Sumeshan Nair, Executive Committee Member at the South African Payroll Association (SAPA).

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Travel allowance versus re-imbursive travel

A fixed travel allowance and /or company petrol card should only be issued to employees who are required to do substantial business travel. It is recommended that companies assess travel allowances issued to employees on an annual basis to ensure that the allowance paid is in line with business kilometers travelled.

There are various factors which influence this calculation and employers are advised to consult SARS guidelines in this regard. Should the business travel be incidental then companies should use the Reimbursive travel option.

“While travel allowance is reported against the IRP5 code 3701, Reimbursive travel is reported against IRP5 code 3703 if

reimbursements are below the SARS recommended rate and IRP5 code 3702 codes if reimbursements are made at

a rate higher than the SARS recommended rate.

“Note, only the portion above the SARS recommended rate should be allocated against IRP5 code 3702. Reporting travel allowance and reimbursements correctly to SARS is crucial as it could have a negative impact on employees and result in employees having to pay into SARS on assessment,” said Nair.

“Companies have the ability to tax a certain portion of the travel allowance paid to employees, a process which is facilitated by most payroll systems. Most employers choose to tax 80% of the travel allowance paid to employees as a precaution and in the best interests of both the company and the employee,”

said Nair.



Requirements to claim deductions

Employees need to meet a number of requirements in order to claim travel allowance deduction from SARS.

Some of these requirements include maintaining a log book, recording the total distance travelled for business and personal use and proof of travel expenses should be retained. On assessment employees can claim against costs related to wear and tear of their vehicle, maintenance and repairs, vehicle license costs, insurance costs, and finance charges.

“It is important to note that an employee cannot claim travel allowance deductions if they are using a company car for business purposes. Travel between an employee’s home and place of work is regarded as private travel,

for which they also cannot claim travel expenses from SARS,” said Nair.

Nair advises that it is not an employer’s responsibility to ensure an employee maintains their log book but rather it is in the best interest of everyone who receives a travel allowance to do so, should they want to claim deductions for business travel expenses on their income tax assessment.

“Employees need to keep their logbooks up to date and ensure their submissions to SARS are 100% factual. SARS has a logbook template available on their website which is available to all. I recommend employees download this for use as it indicates all details required by SARS for the purpose of claiming a deduction. DOWNLOAD YOUR FREE SARS E- LOGBOOK HERE

“Employees should keep this on hand at all times so that they get into the habit of updating it as they travel for business. Without a logbook, employees will not be able to claim any deductions and results in employees being required to pay into SARS on assessment,” said Nair.

How does rental income and


https://www.sars.gov.za/AllDocs/Documents/Logbook/2019-20%20SARS%20eLogbook.pdf


income tax work?

Picture: 123RF/DAVID FRANKLIN

The ability to earn a passive income through property is a wonderful opportunity that can add significantly to your

monthly monetary needs.

A rental property that is well-positioned, in demand and well maintained is an excellent asset and a sound investment. But in terms of rental income and income tax, how exactly does it work?

Craig Hutchison, CEO of Engel & Völkers Southern Africa said that if you rent out a property and receive a rental income, it will be subject to tax.

“Rent received from the letting of residential accommodation such as a holiday home, cottage on your property, sub-renting part of your house or a townhouse will all be subject to being taxed. The rental income is added to any other taxable income you receive, such as a monthly salary,” Hutchison said.

Can the taxable income be reduced?

Yes, the taxable income accrued from renting out a property can be reduced as expenses are always incurred.


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Expenses that may be deducted from rental income include:

Bond interest Rates and taxes Property levies Estate agency fees Homeowners insurance (excludes household contents insurance) Garden services Repairs Security

Which expenses are not allowed?

It must be noted that only expenses related to the rental of the property may be deducted. Capital and private expenses won’t be considered as a deduction by SARS.

“While maintenance and repairs expenses can be passed, improvement costs are a capital expense and will be included in the base cost of the property. When the property is sold, the improvement costs will be an expense that will effectively reduce the capital gain, thus reducing the capital gains tax payable to SARS,” said Hutchison.

If expenses exceed rental income

There are times when, for one reason or another, the expenses accrued from leasing a property exceed the income. The loss should then be off-set against other income received by you the owner.

When leasing out a property it is always best to consult with an accountant or tax specialist to fully understand what is deductible, how much tax will essentially be paid over the annual lease period and the like. This will provide a realistic view of your nett income.

“Income tax aside, the leasing of a residential property if managed effectively, is a viable and financially sound way of adding to your monthly income stream. At the same time, you are the owner of an asset that will appreciate in value over time and will pay dividends as the years go by,” said Hutchison.



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PROVISIONAL TAXPAYERS.The first period for 2020 includes the six months from the start of the new tax year (March 2019). If you make your first payment after the deadline, the South African Revenue Service (SARS) will

automatically levy a penalty of 10% of your tax due. SARS also charges interest at 10.25% of the tax due. If you fail to submit a return, SARS may estimate your tax liability based on prior returns. SARS may also ask you to justify your estimates and can increase it if they are not satisfied with the taxpayer’s calculation. It is important to keep any supporting calculations.

NB NB NB NB

SHOULD THERE BE THE NECESSITY OF A TOP UP ON YOUR 2019 INCOME TAX AS ASSESSED, THEN INTEREST STARTS TO ACCRUE AT SARS’S OFFICAL

INTEREST RATE FROM 1 OCTOBER 2019.

The Team @ DRD Consulting



Hugo, Angela, Dot, Ferial, Linda, Sam and Leon

Visit us at www.drdconsulting.co.za



Contact information

Dorothy Rose Schafer CA (SA)Practice Number 03084501

[email protected]

BookkeepersFerial Salie: [email protected]

Angela Crossland: [email protected] Linda Richards: [email protected]

Samantha: [email protected]

Business Accountant in PracticeHugo Bester: [email protected]

Deceased Estates/Trusts/Mediation/Legal

Leon Terblanche: [email protected]

Web links

www.drdconsulting.co.za

www.tradelegal.co.za

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