Sunday, December 21, 2014

 

PSIberDOCS.......Tax Rules Made Simple


Deductions


Donations | Income Insurance / Protection Policies | Medical Aid Contributions | Pension Fund Contributions | Provident Funds | Retirement Annuities | Unemployment Insurance Fund
 
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DONATIONS

Donations to Universities, Colleges, Technikons and education funds may be deducted up to a maximum of:

This is generally a tax return item.

As from 1 March 2007, Tax exempt donations were raised to R100 000 (previously R50 000) for individuals. Donations tax is payable at a flat rate of 20% on the value of property donated. 


Donations | Page 1 of 7 | Income Insurance / Protection Policies

Allowances


Allowances are paid by an employer to an employee to enable the employee to meet the cost of expenditure incurred on behalf of the employer. This generally forms part of the employee's taxable income.

Generally allowances are fully taxable on a monthly basis. The benefit is realized at the end of the financial year, when the employee deducts the actual expenses from their taxable earnings i.e. claim back the tax that has been paid on the allowances. The deduction must not exceed the  amount of the allowance. 

·          Business travel deductions against car allowance

·          Subsistence allowance

·          Medical Expenses according to defined limits

·          Pension and Retirement Annuity contributions

·          Donations to certain public benefit organizations

·          Expenditure against allowances of Holders of Public Office

·          Wear and Tear allowances on equipment

·          Public Office allowance

·          Uniform allowance

·          Tool allowance

·          Telephone allowance

 

 

Holders of Public Office Allowance | Subsistence Allowance | Travel Allowance | Cellphone OR Telephone Allowance | Computer Allowance | Entertainment Allowance | Transfer Costs (Relocation) | Uniform Allowance
 
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TRAVEL ALLOWANCE

If you are a salaried employee and use your own car for business purposes, then you  should receive a travelling allowance. This will enable you to claim an income tax deduction for the business travel undertaken.

Up to June 97 – 35% of the allowance was subject to PAYE i.e. 35% of the allowance formed part of your taxable income. 
From July 97 – 40% of the allowance was subject to PAYE 
From April 98 – 50% of the allowance is subject to PAYE

From March 2007  – 60% of the allowance is subject to PAYE

Reimbursive Payments - Since March, 1999 - where an employee receives a Travel Allowance and/or any of the employee's vehicle expenses are paid by the employer, all Reimbursive Travel Payments based on kms travelled will be taxed as though it was a Travel Allowance (regardless of rate and distance claimed). Thus, 60% of reimbursive travel expenses will be taxed. Where the employee has no Travel Allowance and no vehicle expenses are paid by the employer, the full amount of the reimbusive payment is non-taxable UNLESS the rate paid per kilometre exceeds R2.92 OR the annual distance travelled exceeds 8000km in which case the full reimbursive amount is taxable income.

Travel between your residence and place of work is not classified as business travel.

The unexpended portion of the travelling allowance is taxed in the hands of the employee on submission of a tax return. Unless accurate travelling records are kept by the employee, it is presumed that the first 18 000kms (previously 16 000) travelled per annum and any excess over 32 000kms, is deemed private travel. Unless travelling records are kept, the receiver will allow for a maximum of 14 000 (previously 16 000) business Kms per annum.

Please note therefore, that if you are going to do less than 18 000 kms of personal travel within the year, OR if you are going to do more than 14 000 kms of business travel, it would  be in your interests to keep a log book.

There are, therefore, two options of determining business travel:

  • Calculate the business travel costs (deemed costs) - you can calculate the business mileage using the gazetted tables and applying rules and rates per kilometer as set by the Minister of Finance
  • Records actual travel costs incurred - accurately record the business travel details and furnish these, with your tax return, to the Receiver. You need to keep a logbook, which reflects the odometer readings, the number  of business kilometers travelled and the purpose for each business trip. This logbook needs to be submitted to the receiver along with your tax return.
  • If you are not using the tax tables to claim running expenses, you must also keep all receipts for petrol, repairs and servicing if you wish to base your deduction on actual costs.
  • Where 'right of use of a motor vehicle' applies i.e. where the employee uses the employer's car, the actual cost of the business mileage must be claimed i.e. the calculated cost does not apply.

Calculation Example

The rates per km are divided into fixed cost, fuel cost and maintenance cost. The fixed cost element relates to depreciation, loss of interest, licensing and insurance for the year. Calculate  the Rate/ Km for Fixed Cost, by dividing the 'fixed cost' by the total distance travelled during the tax year.

Examples

Full Year – Where business travel was carried out for the full tax year, using the same vehicle.


Example: Monthly Allowance    R3000 per month  (R36 000 per year)

Total Kms travelled      45 000
Value of Vehicle      R189 000
Fixed Cost Element   R63 424         (see Schedule A)

Fixed Cost Calculation:       63 424 = 140.95c/Km
                                            45 000

 Total cost per kilometer:   140.95c per Km   Fixed Cost 
                              68.80c per Km    Fuel Cost 
                              41.10c per Km    Maintenance 
                            250.85c per Km    Total cost per Kilometer

Total Business Travel:        32 000 Km       Limit
Less:                                   18 000 Km       Deemed to be private travel
Total business Travel         14 000 Km       Deemed business travel

Total Cost of Business travel: 14 000 x 250.85 cents =    R35 119.00 

 Travel Allowance Received    R36 000.00
 Less:                                       R35 119.00         Deduction allowed
              Taxable Amount         R     881.00

Please Note: The employee can own more than one vehicle and all cars are used for business travel. All vehicles then need to be taken into account. This could be a combination of logged and calculated business mileage. Combinations are therefore as follows:

  • 1 car used for duration of the tax year
  • 1 car used for part of the tax year
  • +1 cars, each used for a different portion of the tax year
  • +1 cars, each used for duration of the tax year
  • +1 cars, combination of logged and calculated business mileage.

Rates per Kilometer

Where accurate records are not kept, mileage is worked out according to the following table (Schedule A) except in the following instances:

  • Where an allowance or advance is based on the actual distance travelled on business , the amount expended is deemed to be:
                      the actual distance travelled X rate/ Km fixed by the Minister of Finance
  • Where an allowance is based on:
             actual distance travelled on business
                 And
                     the distance does not exceed 8 000 Km /tax year
                         And
                             no further compensation or reimbursement is payable to the employee
    the rate/Km may, at the option of the employee, be based on the maximum rate of R2.56 per Km.

Value is determined as follows:

  • Where the vehicle was acquired by an employee under a bona fide agreement of sale or exchange - value equals the original cost, including VAT (finance charges or interest payable is excluded).
  • Where an employer, as a result of policy change, sells his fleet of vehicles to his employees and pays them a travelling allowance – value is the price paid, including VAT, by the employee for the vehicle and not the price originally paid by the employer
  • Where the vehicle is held by the employee under a 'financial lease' or 'instalment credit agreement' OR the ownership was acquired by him on termination of a lease – the value as determined in Section 1 of the VAT Act, together with any VAT paid by the leaser under such financial lease.
  • In all other cases – the market value, plus VAT, of the motor vehicle at the time the vehicle was first obtained by the employee or when right of use was first attained.

Schedule A

Value of the vehicle (including VAT) (R)

Fixed Cost (R p.a.)

Fuel Cost (c/km)

Maintenance Cost (c/km)

0 – 40 000

14 672

58.6

21.7

40 001 – 80 000

29 106

58.6

21.7

80 001 – 120 000

39 928

62.5

24.2

120 001 – 160 000

50 749

68.6

28.0

160 001 – 200 000

63 424

68.8

41.1

200 001 – 240 000

76 041

81.5

46.4

240 001 – 280 000

86 211

81.5

46.4

280 001 – 320 000

96 260

85.7

49.4

320 001 – 360 000

106 367

94.6

56.2

exceeding 360 000

116 012

110.3

75.2


Subsistence Allowance | Page 3 of 8 | Cellphone OR Telephone Allowance

Fringe Benefits


The package you receive from your employer may include certain benefits apart from your cash remuneration. These benefits, as listed below, are known as 'fringe benefits'. For income tax purposes, it is necessary to place a monetary value on these benefits and include it in your taxable income.

The fringe benefit is only worthwhile if the taxable value thereof is less than the cost of the actual benefit.

 Fringe benefits are usually valued as follows:

Cost of the benefit to the employer                              5000
Less any amount paid by employee for the benefit   - 2000
                Amount included in taxable income             3000

The exceptions to the above calculation are:

  • Company car
  • Residential Accommodation
  • Holiday Accommodation
  • Low Interest or Interest free loan
  • Company paid Medical Aid contributions  
Acquisition of Asset for Less than Market Value | Bursaries/Scholarships (Education Costs)  | Deemed Loans | Free or Cheap Services  | Holiday Accommodation | Loan Subsidy | Low or Interest Free Loans | Meals / Refreshments / Vouchers | Medical Aid  | Medical Expenses | Payment of Employees Debt | Residential Accommodation (Provision of) | Share Incentive Schemes (Broad Based Employee Shar | Subscriptions  | Use of Assets (excluding Car & Accommodation) | Use of Motor Vehicle / Company Car
 
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ACQUISITION OF ASSET FOR LESS THAN MARKET VALUE

You are regarded as having derived a taxable benefit, if you acquire any asset free or for less than its value from:

  • your employer
    or
  • associated institution in relation to your employer
    or
  • any other person by arrangement with your employer

Asset in this context refers to:

  • Goods
  • Commodities
  • Marketable securities
  • Property of any nature (other than money)

Value is defined as follows:

  • If it is not a movable asset, the market value at the time that you acquired it
  • If it is a movable asset:
    • your employer acquired it in order to dispose of it to you, the employer's cost price will be taken as the value
      OR
    • the asset was the employer's trading stock, the employer's cost price will be taken as the value. If it can be shown that the market value is less that the cost price, then the market value will apply.

The above rules do not apply to marketable securities or an asset on which the employer had the right of use before acquiring ownership thereof e.g. a leased asset on which the employer had the right to acquire ownership at the end of the lease agreement. If an employee acquires marketable securities or such asset, the value would be the market value.

Exempted from tax are:

  • The first R5 000 of the cost to your employer of all the assets (not money) presented to you by your employer during the tax year as awards for bravery
  • The first R5 000 of the cost to your employer of all the assets (not money) given to you by your employer during a tax year for long service, which is taken as an initial unbroken period of service of at least fifteen years or any subsequent period of at least ten years
  • Fuel or lubricants supplied by your employer for use in a motor vehicle of which your private use is a fringe benefit (see 'Right of use of motor vehicle')

 


Acquisition of Asset for Less than Market Value | Page 1 of 16 | Bursaries/Scholarships (Education Costs)

Other


Gratuities (Lump-sums)
 
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GRATUITIES (LUMPSUMS)

A gratuity is a voluntary amount paid to an employee by an employer in respect of his/her termination of service.  Common examples are:

  • Retrenchment
  • Retirement
  • Resignation / Discharge

The first R30 000 of an amount, received by or accrued to an employee because of the termination of his services or because of the impending termination of his services within five years, is exempt from tax provided that:

  • The taxpayer has attained the age of 55
    OR
  • The employer died before retirement
    OR
  • The termination or impending termination (within 5 years) is due to ill-health or other infirmity
    OR
  • The termination is as a result of his employer having ceased business, or where he has affected a general reduction in personnel or  a reduction in personnel of a particular class

The exemption does not apply where the employer is a company and the employee was at any time a director or at any time held more than 5% shares of the company's issued share capital.

Please note that with effect from 23 February 2000, restraints of trade paid to natural persons or 'employment companies' are included as income in the hands of the recipient, and will be taxed as such.  The payer may deduct such payment over the longer of the period of the restraint of 3 years.

 


Gratuities (Lump-sums) | Page 1 of 1 | Gratuities (Lump-sums)