The 2018 tax season for individuals opens on 1 July 2018 and serves as a reminder that we’re flying towards the end of the year.
Whether you’re a first-timer, or an old hand when it comes to submitting an income tax return: Take three minutes to make sure you’re not paying the taxman too much this year. In this blog, we focus on special income tax deductions, specifically for the following tax payers:
The sole proprietor: Dreaming of a huge, fancy office building but still grafting from home (for now).
The commission earner: Chasing sales with more than 50% of his monthly salary being hard-earned commission.
HOME OFFICES EXPENSES
You’re a sole proprietor:
You work mainly from home.
OR
You’re a commission earner:
A condition of you employment is that you carry the cost of a home office. You should be working more than 50% of your working hours from your home office.
HOME OFFICE:
A separate room or space in your house, used exclusively for work. The office should be properly equipped e.g. has a printer, computer, etc.
- Repairs and maintenance to the office
- Rates, taxes and electricity
- Interest on your bond
- Cleaning costs
- Insurance
Floor space of Office (m2) / Floor space of House (m2) X Total Expenses
Click here to download a schedule of the supporting info you should have ready in case SARS ever asks for it.
ADDITIONAL INCOME TAX DEDUCTIONS
- The sole proprietor
- The commission earner
- Entertainment: Food, drinks, accommodation, gifts
- Telephone: Service contract, airtime
- Depreciation: On assets including software, laptops, etc.
ENTERTAINMENT:
You must be able to support who you entertained and for what purpose.
Naturally, you might be utilising some of your monthly expenses for private use. SARS requires you to adjust the total expenditure for personal use. There’s no fixed % prescribed by SARS, and you’ll have to prepare a realistic apportionment of your actual expenses.
Make sure you can support all you expenses with slips and solid calculations – Excel is your friend.
THE TRAVEL ALLOWANCE IN SIMPLE TERMS
SCENARIO A:
Your employer reimbursed you for business travel.
No stress, this is tax exempt (as long as your employer paid you < R3,55 per km) and the business travel for the year did not exceed 12,000 km in total.
(No deduction available.)
SCENARIO B:
Your employer paid you a fixed monthly travel allowance.
You’ll be taxed on 80% of the travel allowance but you can claim a deduction.
(Refer to the discussion below.)
SCENARIO B:
- Fuel
- Maintenance and service
- Licences
- Insurance
- Finance charges
REMEMBER:
Travelling to and from the office is deemed to be private.
CHECK: Do you have an accurate logbook and records of all your actual expenses?
YES
Have all slips and invoices ready.
Download the SARS e-Log Book to make sure that your logbook is up to standard.
Income Tax Deduction =
Business km / Total km X Total Expenses
NO
If you are self-employed, proceed to calculate an income tax deduction.
First, calculate private use:
3.5% X Vehicle cash value
Income Tax Deduction =
Total expenses – Private use
Once you’ve calculated the above, obtain all your relevant tax certificates:
- IRP5 certificates: From your employer.
- IT3 certificates: From any fund you and your employer contributed to (pension, provident fund, etc.) Remember to obtain IT3 certificates from investment funds for any interest or dividends earned during the year.
You’re a unique tax payer with unique income tax deductions – make every penny count.
