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(How to break even at the end of the year.)

Although travelling allowances can become a minefield, with a little bit of planning and lots of good advice you too can break even at the end of the year. You can determine the amount of your travelling allowance so that you pay the correct amount of tax on a monthly basis, so that on assessment you have no outstanding income tax liability or credit, you simply need to address the following:

·         Do you use a car for business travel and are you prepared to keep a log book?  If the answer is no I don’t travel for business or I don’t want to keep a log book – you do not qualify for a travelling allowance.  If yes,

·         You need to record the cost of your car and project your total kilometers that you will travel for the tax year from 1/3/2011 to 28/2/2012.

·         You also need to project what business kilometers you will record in your log book for the tax year from 1/3/2011 to 28/2/2012 (a log book is mandatory and if you do not wish to keep one, do not have a travelling allowance).

·         From this information, it will be possible to project your travelling deduction for the tax year ending 28/2/2012 using the tables provided by SARS.

·         Once your projected travelling deduction is determined, you will be able to work out your travelling allowance:

o   If more than 80% of your travel is recorded for business, then you simply take your travelling deduction divided by 80% and divided by 12 months to produce the amount of your monthly travelling allowance. (download example here)

o   If less than 80% of your travel is recorded for business, then you simply take your travelling deduction divided by 20% and divided by 12 months to produce the amount of your monthly travelling allowance. (download example here)

Remember: Home to your office and from your office home is regarded as private travel.  However home to a client and then onto the office changes the trip to 100% business travel.

Also please remember that if you initially projected that 60% of your total travel was for business and it ends up being only 40% for business travel, you will end up on assessment with a liability.  This is because your travelling allowance would have been overstated.

Lastly, your travelling deduction that you submit on your income tax return may not exceed the amount of your travelling allowance.
Ian Hurst
http://www.paymaster.co.za/