Whether you’re self-employed or work for someone else, there are several types of business travel expenses that you may be able to deduct when you file your tax returns. If you are new to deducting travel expenses, or are wondering exactly what can be deducted, here is a quick guide that should put you on the right track.
Only business trip expenses are tax-deductible, not leisure travel expenses.
Before we list the travel expenses that can be deducted from tax, it’s important to understand what is meant by business travel. The South African tax laws are quite clear that expenses incurred during travel are only tax-deductible if the trip was business-related. SARS is quite thorough about checking up on this point, and taxpayers who try to deduct expenses from a leisure trip may find themselves in hot water.
Do you have a travel allowance?
If you’re employed by someone else, you should be able to claim travel expenses against your travel allowance. In this case, employees should keep a vehicle log book and provide proof of all expenses (original documents) to their employer – if you own your own business, make sure that your employees provide you with these.
Travel deductions for the self-employed
If you work for yourself, work on commission, or own your own business, you won’t be able to claim against a travel allowance – but don’t despair. Self-employed people can claim their travel expenses as a General Deduction as outlined by section 11 (a) of the Income Tax Act:
For an expense to qualify for a tax deduction, it must be (i) incurred in the production of the income; (ii) not of a capital nature; and (iii) in the furtherance of the taxpayer’s trade.
Simply put, this means that any travel expense you incur in the process of earning an income may be tax-deductible. However, point (ii) is an important one to note: travel expenses that were incurred in order to purchase capital equipment for the business (like taking a business trip to view a new piece of equipment) may not be tax-deductible.
In this situation, the cost of viewing the equipment would have to be counted as a base cost of the asset – this will save you money on Capital Gains Tax if the equipment is re-sold.
Keeping records of travel expenses
In general, all expenses you incur on a business trip need to be proved to SARS before they can be claimed as deductions – this prevents taxpayers from claiming fictitious expenses. Remember to keep original documents for absolutely every expense you want to claim, and you may just find your tax bill significantly reduced.