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Must an independent contractor keep a travel logbook to get a deduction for travel expenses?

Tuesday, 03 March 2015   (1 Comments)
Posted by: Author: SAIT Technical
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Author: SAIT Technical

Q: An independent contractor’s annual financial statements are currently being audited by SARS. One item, motor vehicle expenses is being analysed.


1.         Do the motor vehicle expenses incurred require the support of a travel log book? SARS requested the logbook.

2.         I thought a travel logbook is only applicable to travel allowances for employees.

3.         If so, would a travel logbook now become necessary for sole proprietors, as I consider this taxpayer to better suit this category?

4.         The independent contractor in question has different income sources.

5.         Do any of the SARS interpretation notes deal with this?

6.         How would it be possible to maintain a travel logbook for a variety of income sources?

7.         My approach has been to record all motor vehicle expenses and add back a deemed private portion. Same has been accepted after audit, in previous years.

8.         This methodology has been applied to sole proprietors and professional persons’ tax returns and accepted by SARS.

A: Is a logbook required?

Sole traders many times use their own vehicles for business travel purposes for which they will seek a deduction in terms of section 11(a) of the Income Tax Act ("ITA").

They will be able to obtain the deduction to the extent that the expenses are actually incurred in the production of income.

Remember, however, that section 11 deductions must be read together with section 23 of the ITA, which prohibits deductions in certain circumstances.

Section 23(g) specifically disallows deductions "in respect of...any moneys, claimed as a deduction from income derived from trade, to the extent to which such moneys were not laid out or expended for the purposes of trade."

A sole trader's motor vehicle is usually used for both private and business purposes. All the expenses incurred in respect of that vehicle will not expended for the purposes of trade and to such extent, will not be deductible in terms of section 11(a).

The sole trader must therefore apportion his motor vehicle expenses (which he actually incurred) between whatever relates to business use and private use. It is only the portion of total motor vehicle expenses relating to business use that will be deductible [assuming all other section 11(a) requirements are met]. This is why business kilometres travelled during the tax year, and by extension a logbook to prove such, is important. It allows the sole trader to verify (to SARS) the apportionment of the vehicle expenses for business use.

Section 102(1)(b) of the Tax Administration Act (TAA) states that the taxpayer bears the burden of proving that an amount is deductible. The logbook can assist the taxpayer in discharging this burden of proof. Furthermore, section 23 of the TAA also requires that a person who has submitted a return keep records that enable SARS to be satisfied that a person has observed the requirements of a tax Act.

In conclusion, SARS can request a logbook for the purpose of verifying the motor vehicle (business) expenses of a sole trader.

Further answers

With regards to the maintenance of a logbook for travel expenses incurred in the production of various income sources, the taxpayer may have one logbook and record the kilometres travelled for the different business purposes. Typically logbooks have sections where one is required to provide details for what exactly the business travel pertains to. The taxpayer can therefore specify whether the travel was in respect of his work as a freelance journalist, newsreader, television presenter, public speaker etc.

The following is an excerpt from the SARS 2014 Comprehensive Guide to the ITR12 return for individuals:


If you did not receive a travel allowance but incurred travel expenses in the production of your income, you may claim a deduction based on a logbook that must be retained for a period of 5 years after the date of submission of the return and must be available on request from SARS. The amount of your claim must be filled in next to code 4015.

Disclaimer: Nothing in this query and answer should be construed as constituting tax advice or a tax opinion. An expert should be consulted for advice based on the facts and circumstances of each transaction/case. Even though great care has been taken to ensure the accuracy of the answer, SAIT do not accept any responsibility for consequences of decisions taken based on this query and answer. It remains your own responsibility to consult the relevant primary resources when taking a decision.


Rachelle Cilliers says...
Posted Wednesday, 16 September 2015
I have recently completed a tax client's return (ITR12) and based on his IRP5 he only received income next to code 3616 (independent contractor). He however kept a log book with all his business kilometres, which we claimed under 4015. According to the additional assessment received today, the travel expenses could not be claimed as he did not receive a travel allowance. Please assist! Should I lodge a NOO?



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