Tax season inevitably means digging out all those airline boarding passes, fuel slips and receipts from your travels over the past year. As a frequent business traveller, you’ve likely accumulated quite the collection in hopes of a decent refund on allowable expenses.
However, the taxman wants more than a shoebox stuffed with crumpled receipts. Unless you’re a tax expert, you may be unsure what expenses the South African Revenue Service (SARS) considers legitimate deductions. Trying to write off an extravagant stay at the Saxon Hotel or a lavish meal at Greenhouse would probably raise some red flags.
“While business travel allows for some indulgences, it’s no excuse to go overboard,” Bonnie Smith, GM of Corporate Traveller, notes. “Understanding what SARS deems reasonable expenses allows you to plan work trips without stressing over compliance.”
Know your legitimate deductions
Smith explains that travel expenses are considered a type of business expense and business-related expenses can be legitimately claimed. However, there are specific conditions and limits for claiming travel expenses from SARS.
You can only claim travel expenses from SARS if you receive a subsistence allowance from your employer, which covers meals, parking, and other costs, or if you earn commission and more than 50% of your total remuneration comes from that commission. The allowable expenses vary based on your position and the nature of your travel.
If you’re a high-level executive like Thabo from the C-suite, you may be able to claim expenses for business-class flights and five-star hotels. However, if you’re an employee like Sipho from accounts, the maximum allowable amount for meals and incidental costs per night within South Africa is R548. Different limits apply for foreign travel.
Smith says, “No record keeping is required for spending up to this amount.” This means that if you spend within the allowable limit, you don’t need to itemise your meal expenses. You can choose how to allocate the funds, such as paying for dry cleaning or tips, but your meal allowance may only cover some of your costs, especially if you indulge in expensive items like single malt whiskies. Any additional expenses beyond the allowance must be paid out of pocket.
“You can only claim basic travel expenses and SARS will scrutinise the time, place and purpose of your travel to ensure you’re not on the road for personal reasons, such as testing mattresses at upscale B&Bs unless that’s actually your job,” notes Smith.
The rules for claiming travel expenses may vary depending on whether you work for a large company or are self-employed, a contract worker, or a small business owner. In large companies, deductions are often straightforward, while self-employed individuals may have more flexibility but also face additional requirements and scrutiny.
Document your travel expenses
Documenting your expenses will increase the chances of a successful tax claim, according to Smith. Keep physical receipts that clearly show the date, amounts spent, and itemised details of the purchases.
“Using your personal vehicle for business is different from using a company car. You’ll need to record your car’s odometer reading on March 1st (the start of the new tax year) and maintain an accurate logbook detailing your business and personal trips throughout the year,” she explains.
“You can claim expenses related to fuel costs for business trips, but not for commuting between home and your office as those are not considered direct business expenses. However, if you work in an office but occasionally visit clients 50km away, those trips could be deductible expenses – it’s best to consult a tax expert.”
Although keeping meticulous records is time consuming, it will simplify the process and can significantly reduce your taxable income.
Maintain all necessary documentation and file or digitise what you can if SARS decides to conduct a tax audit. A shoebox full of crumpled receipts won’t soften the taxman’s heart.
Tips for successful claims
Smith recommends these tips for submitting travel and expense claims to SARS:
- Find out your expense budget and reconcile actual amounts with your budget after eating out, taking petrol, etc.
- Ensure your expenses are directly related to your business activity – you can’t travel to a conference via Makro to buy an air fryer.
- Keep meticulous records of your expenses, including receipts, a logbook, and/or a spreadsheet. Include the date and time of purchases, which clients you visited, and why you made those visits.
- Keep a record of basic expenses for your subsistence claim – where you had your meals, whether the company paid for them in full or in part, and who accompanied you (if you were treating a client to lunch, for example).
- Before you submit your expenses, understand what is deductible and what isn’t so that you do not attract penalties.
- Take care when claiming VAT on entertainment expenses. Entertainment is one area in which SARS does not allow VAT deductions, although companies can claim VAT back on, among other things, business travel and employee subsistence, domestic airfares, parking, toll fees, and internet costs.
