Michelle Bernard Ari Swanepoel TAX3702 2018 Michelle Bernard Ari Swanepoel

TRAVEL ALLOWANCE (LU 3) Employer & Employee relationship

I give you a TRAVEL ALLOWANCE = R75 000py BUSINESS USE 10 000km for the year BUSINESS USE PRIVATE USE

Determined Value Business kilometres Private kilometres INCLUDING VAT Business kilometres Private kilometres How much of the costs relate to business km’s travelled?

NOTHING HOW TO DETERMINE YOUR DEDUCTION NOTHING NOTHING NO LOGBOOK NO RECORDS LOGBOOK NO RECORDS LOGBOOK RECORDS DEEMED COSTS R/km Fixed Cost per km Fuel Maintenance NOTHING YES! Per table YES! Per table ACTUAL COSTS Rands NOTHING NOTHING YES! Actuals Full travel allowance deemed for private use = fully taxable! Travel allowance less business km’s = private km’s taxable Travel allowance less business km’s = private km’s taxable

Other possible costs in questions Travel Allowance = Full year Employee owns vehicle Other possible costs in questions Vehicle is financed DEEMED COSTS R/total km Fixed cost per km Fuel Maintenance Per table based on determined value Per table based on determined value Per table based on determined value ACTUAL COSTS Rands Wear & tear Fuel Maintenance TOTAL R / total km’s Tyres – Yes! Insurance – Yes! Licence fees – Yes! Determined value / 7 Capital repayments – not allowed Actual costs Finance charges – Yes! Maintenance plan – No! Speeding fines – prohibited!

Question M receives a travel allowance of R75 000 for the year M kept accurate logbook and accurate record of expenses Cost of the vehicle = R480 000 (VAT inclusive) Business km’s = 11 200km Private km’s = 18 000km Fuel for the year = R30 700 Insurance & licence fees for the year = R16 900 Maintenance covered by maintenance plan for the year = R6 000 Capital repayments for the year = R12 200 Finance charges for 5yrs = R116 100

Suggested solution Highest Business km’s = 11 200km Private km’s = 18 000km TOTAL km’s = 29 200km’s Determined value = R480 000 (incl VAT) DEEMED COSTS Calcs R/total km Fixed cost per km 134 035 / 29 200km 459,02 Fuel 146,0 Maintenance 68,4 Highest = R6,734 per km ACTUAL COSTS Calcs Rands Wear & tear R480 000 /7 68 571 Fuel 30 700 Maintenance Not paid by employee Insurance&licence 16 900 Capital repayments Not allowed Finance charges 116 100/5 23 220 TOTAL 139 391 Cost per km = R139 391 / 29 200 = R4,774 per km

Taxable income Travel allowance 75 000 R R Travel allowance 75 000 Less business travel (R6,734 x 11 200km) = (75 421) (421) Taxable fringe benefit - limited to travel allowance 0

Question - adjusted M receives a travel allowance of R75 000 for 60 days M kept accurate logbook and accurate record of expenses Cost of the vehicle = R620 000 (VAT inclusive) Business km’s = 11 200km Private km’s = 18 000km Fuel for the year = R30 700 Insurance & licence fees for the year = R16 900 Maintenance covered by maintenance plan for the year = R6 000 Capital repayments for the year = R12 200 Finance charges for 5yrs = R116 100

Suggested solution Highest Business km’s = 11 200km Private km’s = 18 000km TOTAL km’s = 29 200km’s Determined value = R620 000 (incl VAT) DEEMED COSTS Calcs R/total km Fixed cost per km 154 879/29 200km x 60/365 0,87 Fuel 150,9 Maintenance 84,9 Highest = R2,367 per km ACTUAL COSTS Calcs Rands Wear & tear R595 000 /7 x 60/365 13 973 Fuel 30 700 Maintenance Not paid by employee Insurance&licence 16 900 Capital repayments Not allowed Finance charges R595 000/R620 000 x 116 100/5 x 60/365 3 663 TOTAL 65 236 Cost per km = 65 236 / 29 200 = R2,234 per km

Taxable income Travel allowance 75 000 R R Travel allowance 75 000 Less business travel (R2,367 x 11 200km) = (26 510) 48 490 Taxable fringe benefit 48 490

EMPLOYEE’s TAX Learning Unit 9 Remember this is a monthly tax withheld by the EMPLOYER on behalf of the employee Employer will not know what the total kms travelled for the year is! 80% ; 20% Rule Include 80% of the travel allowance R75 000 x 80% = R60 000 taxable fringe benefit