Simplifying tax matters and saving tax legitimately
Every week Kloof resident, Martin Baker will unpack taxation for the man on the street.
INTRODUCING Martin Baker, a Highway area resident for 50 years and educated at Kloof schools, who will unpack taxation for the man on the street.
“Tax has always been a subject that I have enjoyed and I enjoy assisting persons who make errors in paying too much tax to SARS,”said Martin.
“I worked for SARS for 15 years and studied at night classes after work to qualify, and became an avid reader of tax court cases and gleaned a substantial knowledge from that source which now allows me to conduct my business effectively.”
To relax Martin enjoys art, horse riding and tennis.
Martin’s first article is entitled: Make sure that you claim the maximum deductions you can from the South African Revenue Services.
For the purposes of relevance this article will apply to the 2017 year of assessment which taxpayers are submitting now to SARS.
The government of the day secures most of its tax from individual taxpayers and although there are large companies out there they pay little tax or none because there are a number of tax allowances afforded to them.
Where employees derive a traveling allowance or a company vehicle as part of their gross remuneration, I can assure them that they will derive a tax refund from SARS.
The cardinal rule regarding car allowances is that they have to be bona fide, that is to say that if an employee is office bound and receives a car allowance the employer is not being compliant with SARS. Both the employee and the employer will find themselves in hot water.
It is important that the employee/taxpayer is compliant with SARS’s requirements. These requirements are that full details of the make, model, registration number and cost of the vehicle including VAT are disclosed.
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If more than one vehicle is used during the tax year the date of acquisition of the new vehicle is also required. SARS also require a copy of the installment sales agreement or lease agreement to determine the value of the vehicle inserted in the return. Remember finance charges/interest does not make up the cost of the vehicle.
Let’s first look at an employee who derives a car allowance. In addition to aforementioned requirements the most important is the provision of a log book.
This is, I admit, an onerous document to complete, but it would really be worth the effort. A number of clients I deal with have a GPS unit fitted to their vehicles and this allows reports of travelling to be printed out at the end of the tax year which will be sufficient for SARS.
When claiming against a traveling allowance there are two methods one can use. They are either fixed cost per km or actual cost per km.
In all instances I have found that the fixed cost method method delivers a higher deduction that the actual cost method. In addition the actual cost method requires the employee/taxpayer to retain receipts which is also an onerous task.
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When an employee/taxpayer derives the use of a company vehicle the employer (company taxpayer is working for) is obliged to tax him on the value which includes VAT per month as a fringe benefit.
It is a given fact that the taxpayer/employee uses that company vehicle to undertake business travel. The taxpayer, therefore, is able to reduce that fringe benefit by the business mileage he has traveled resulting in a deduction in his favour. Again the log book is vitally important as it distinguishes between business and private travel.
To conclude, it is paramount that all documents mentioned above are readily available as SARS may call for them to validate their claim.
In some instances your case may be selected by SARS for audit which will delay the refund being paid out to you.
Martin Baker s.a.i.p.a.
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