Warning Danger Ahead - Changes To Travel Allowances
The Minister of Finance has given advanced notice that the deemed business kilometres procedure is to be scraped effective as from 1 March 2010 (i.e. the commencement of the 2011 tax year).This means that taxpayers who receive travel allowances will not, as from the above mentioned date, be able to use the deemed business kilometre procedure to justify such allowance in their tax returns (i.e. the first 18 000 kilometres is deemed to be private and business kilometres is limited to 14 000 kilometres). Should taxpayers wish to justify a travel allowance in their tax returns, they will have to maintain a logbook of business and private kilometres travelled during the tax year.
Many taxpayers will find the burden of keeping logbooks too much.For these taxpayers, it will mean that their travel allowances will become fully taxable.The current PAYE system taxes only 60% of a travel allowance and not the full allowance.If this system is retained, this will result in amounts due on assessment.The Minister is giving these taxpayers advance notice to adjust their travel allowances to avoid paying in amounts on assessment.Such a change will have a material effect on the take-home pay of these taxpayers and it is recommended that they start planning for this event now.
Other taxpayers will decide to keep logbooks only to find at the end of the 2011 tax year that their actual business kilometres do not justify the level of their travel allowances.These taxpayers will also find themselves in the position of having to pay in amounts on assessment.Both employers and employees will have to use the one-year grace period to reevaluate the current level of travel allowances paid and base travel allowances on realistic business kilometres.
Section 240A of the Tax Administration Act, 2011 (as amended) requires that all tax practitioners register with a recognized controlling body before 1 July 2013. It is a criminal offense to not register with both a recognized controlling body and SARS.