Claiming tax on cars
It’s that time of the year where many in Mzansi are submitting their personal tax returns (IRP5), we note key points we have learned so far on what impact this has on car owners.
By car owners we are referring to people who either have company cars or get car allowances or use their own personal cars for occasional business/work.
1. Car Allowance Best put, this is the scheme where you get a monthly allowance (income source) for business use of a registered motor vehicle. Let me clarify this in an easier way, people who have been given a car allowance by their employers, get this financial benefit in advance.
The car allowance forms part of your total employment package. At the time of completing and submitting your IRP5 documents, we have learned that you might have to consider the following key points: Under the code 3701 on your IRP5 form submission, you then put the necessary information regards your travel in that financial year. The financial year of tax submissions (tax period) goes from travel done between March 1 of a year to the following year’s February 28.
For this year’s submission, you are looking at March 1, 2017 to February 28, 2018. All personal and business travel done during this period is used for your submission.
2. Log book: This is the single most important document needed for filing when you have a car allowance. This should not be confused with a logbook that proves ownership but this is more a book where you “log” your daily business trips or even personal trips when using a car purchased under a car allowance scheme. When completing your log book for the tax year, you will need to take note of the following:
Mileage: This is the distance in kilometres you travel in your vehicle in that particular period
Work / business trips: You complete this section DAILY when doing business trips in your car. These are trips are directly related to your work. Traveling from home to your work address is not a business trip. When you travel from one destination to another for conduct official work, this is then regarded as a work/business trip.
Day to day: Each trip on each day will need to logged on your logbook independently and most importantly, you will need to put a business reason for EACH trip just in case SARS decides to conduct an audit on your IRP5 submission.
Closing section: Your logbook will have an opening section and a closing section. The opening section is where you put the exact mileage at the start of your business trip (at point of departure). The closing section is where you put the exact mileage at the end of that particular business trip you have completed (point of arrival). Together with the reason for the business trip, this allows SARS to confirm the mileage and reasons for your business trip on your tax submission.
3. Purchase agreement: You will need to also submit a purchase agreement document as part of your tax submission to prove to SARS you actually own the vehicle you are submitting a claim on. It will have details of the vehicle i.e. (1) Registration number – e.g. 11BB22 GP (2) Price of purchase (3) Model year of first licensing registration – 2014 model (4) The make of the vehicle – VW Polo
4. Double submission You do get instances where a person has a car allowance and has also made a financial claim to the employer for business/work trips. At the time of completing and submitting your IRP5 documents, we have learned that you might have to consider the following key points:
You will use both code 3701 and 3702 on your IRP5 form submission, you then put the necessary information as regards your travel in that financial year. The information/points stated above in each of the categories explained still needs your compliance in full.
It’s important to contact your nearest SARS office should you feel you are inadequately capacitated to complete this section of your IRP5 tax submission.