Keep a business travel logbook or lose out in the next tax year

SARS’ amendment to the way of calculating business travel expenditure could prove to be a big shock for business owners in the next tax year.

A Tax Consultant from Johannesburg says that it is imperative that business owners keep accurate records from 1 March 2010 of business travel in the form of a logbook to ensure that they don’t lose out when the SARS’ change in the method of determining business travel expenditure kicks in.

“Business owners can no longer calculate private kilometres travelled by determining the amount of private use based on the value of the vehicle used,” she warns.

In the past, SARS allowed self employed taxpayers who did not keep accurate records of their business kilometres travelled to calculate the private use based on the value of the vehicle used. This amount would be deducted from the total motor expenditure incurred for the year to determine the business proportion claimable.

“What this essentially means is that an amount, calculated at 2,5% of the determined value of the motor vehicle was deemed to be expenditure attributable to private use, while the balance of the expenditure was deemed to be for business use,” .

This made calculating business travel expenditure fairly straight forward, as demonstrated in the example below.

Rand

Total travel expenses for the year 32 000
Value of motor vehicle (excluding VAT) 100 000
Calculation of section 11(a) deduction
Total travel expenses for the year 32 000

Less:

Deemed portion of private portion per PN24
R100 000 x 2,5% x 12 months (30 000)
Section 11(a) deduction allowed for business travel 2 000

However, it would appear that business owners can no longer rely on this way of calculating business travel expenses as SARS now expects taxpayers to keep accurate records of kilometres travelled.

“We therefore caution all business owners to keep a careful record in a form of a logbook for all business travel as the absence of accurate records reflecting private and business kilometres will result in a zero deduction of expenditure allowed for business travel. With the withdrawal of PN24 being effective from 1st March 2010 we would recommend, if you have not been keeping an accurate record to invest time in updating your logbook before the festive season.”

TAXtalk: www.taxtalk.co.za

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