INCOME TAXES

Travel & Vehicle Allowances - March 2015
Effective 1 March, 80% of a travel AND company vehicle allowances are subject to PAYE and it is compulsory for any person that receives a travel/vehicle allowance to keep a logbook.

VERY IMPORTANT – Employers should ensure that travel allowances paid to employees are reasonable, fair and legal!

The travel allowance should be included in the employment contract and should be awarded based on the nature of the employee's job. The value of the allowance should be a reasonable amount to cover BUSINESS travel only.

Employers should be aware that to prevent SARS from holding them responsible for any irregularities in travel claims, all travel allowances must be reviewed and adjusted now before the end of the 2009/2010 year of assessment. If they wait until 01 March 2010 to adjust travel allowances, SARS may act upon these irregularities.


Logbooks
Effective March 2010 travel expense claims may ONLY be made against travel allowances bases on a correctly formatted and maintained trip logbook! This log must specifiy actual milage and business kilometres covered. Odometer readings MUST be taken on 28th February and are subject to verification by SARS! If you plan to claim a business travel deduction in your next income tax return you will require the opening and closing odometer reading, plus business versus private kilometres, in order to do so.

As announced in the Tax Budget, 28 February 2010 was the LAST year where the “deeming provision” may be used to calculate a business travel deduction. The deeming provision allows taxpayers only to provide their total mileage for the year and are then deemed to have used their vehicle for private travel for the first 18 000km with the remainder (up to a maximum of 14 000km) deemed as business travel. However, according to SARS, this provision was open to abuse and resulted in excessive deductions which do not match actual business expenses. to keep a logbook.


SARS e-LOG
These are available off the SARS website at www.sar.gov.co.za from the e-logbook page or in hardcopy from SARS available free logbooks from its branches countrywide from Monday 1 March 2009 while stocks last.


MICRO BUSINESS PRESUMPTIVE TURNOVER TAX - January 2009


The 2008 Budget announcement that an elective presumptive turnover tax system be implemented for non professional, non service based micro businesses with a turnover of up to R1 million per annum, as been implemented effectice 1 March 2009.  Two years on Pastel reports the following findings, as surveyed amongst its 200 000 SME business clients:
84% reported NO lessing of the admin burden.Only 18% reported an improvement in the bottomline.


With SME's contributing 50% of the econmomy and 60% of employment, a LOT more is needed not just promises with no follow through.
This instrument will effectively replace income tax, CGT, STC, and VAT. The other taxes, levies and duties, such as PAYE and UIF contributions are excluded. Furthermore, the voluntary annual registration threshold would be increased from R300 000 to R1 million. The registration threshold does not only apply to small business presumptive tax, but is generally available to all persons. A taxpayer that wishes to adopt the small business presumptive tax relieve may not be registered for VAT. Where the turnover of a small business exceeds or is likely to exceed the VAT threshold of R1 million, or the taxpayer chooses to opt into the VAT regime despite having a turnover below the threshold, then that small business will be subject to normal income tax and VAT systems.The VAT system requires a high standard of record keeping and thus a small business that is registered for VAT should be in a position to comply with the normal income tax requirements.

Changes have been introduced with regards to deregistration for VAT purposes. The normal rule (as previously stated) is that when any registered vendor deregisters for VAT, that person is required to pay VAT (commonly referred to as ‘exit VAT’) on the value of the assets held before deregistration. Anti-avoidance measures were introduced to prevent abuse and manipulation with the aim to obtain an undue tax benefit.Before applying for deregistration for VAT, it is critical to calculate the financial burden of the exit VAT and cash-flow needs for the six month payment option.


Checklist:
We have designed an easy to use assessment tool that makes sense of the badly worded and structured table proposed by SARS, to check if this option is available to you. Should this be the case we offer a comparative test on the estimated tax positions between the normal and presumptive tax systems.

Summary
In the main Turnover Tax EXCEEDS Income Tax, with it only becoming worthwhile due to compliance costs. HOWEVER close corporations are ALSO regulated by an ACT which despite reduced Tax requires, MUST still maintain FULL accounting records!
The tax tends to favour 'non professional' taxpayers with high gross profit pecentages or small vendors with LOW mark-ups.


Acknowledgements: SAIPA Journal - modified