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How to claim vehicle expenses in your tax return

Posted 3 June 2016 under Tax

A taxpayer is only allowed to claim car expenses if you receive a vehicle travel allowance or a vehicle purchase allowance. This allowance is normally awarded to employees who use their personal cars for business travel.

How do I claim my vehicle expenses in my tax return?

  • Logbook

You will need to keep a logbook (A logbook is a book or number of sheets, in which the detail of a travel or trip is documented) for the tax year (1 March 2015 up to 29 February 2016), that indicates the total amount of kilometers travelled with your vehicle. This should be split between kilometers travelled for business purposes and kilometers travelled for private/personal purposes.

It is important to note that travelling from your home to your office or your workplace is not business travel.

  • Details of your vehicle

When completing your tax return online via TaxTim, please make sure that you have the following information ready:

  • Make and Model of the car (only if purchased)
  • Price of vehicle (only if purchased)
  • VAT charge on the price of the car

Normally the purchase agreement from when you bought the car is sufficient.

  • What expenses can be claimed

The following expenses that directly relate to the car used for business travel, may be claimed against the travel/car allowance:

  • If vehicle is purchased: An annual allowance at 33,3% of the total purchase price of the vehicle (for the year in which the vehicle was purchased and for the successive 2 years);
  • Please note you cannot claim the capital allowance on a vehicle already purchased a few years ago. If you do not claim the capital allowance in the year the vehicle was purchased, the claim is forfeited.
  • Also note if you claim capital allowances, this should be recouped/paid back when the car is sold or no longer used for business purposes. Want to know more about recoupment - click here
  • If vehicle is not purchased: Any rental or lease payments towards the vehicle being used;
  • Fuel, oil, repairs, tyres and maintenance of the vehicle;
  • Licenses and insurance of the vehicle;
  • Accident damage repaired;
  • Financing expenditure (such as interest paid on a vehicle purchase loan).
  • Insurance pay-outs and recoveries on accident damage

It is important to know that you will have to deduct any insurance payout and/or recoveries received (from your insurance company) for car accident damage, from your motor vehicle expenses for the tax year.

  • Claiming the motor vehicle expenses in your tax return

Step 1: Add all your motor vehicle (car) expenses together for the tax year;

Step 2: Deduct any insurance payouts received during the tax year for car accident damage from your motor vehicle expenditure;

Step 3: Write down your vehicle’s KM balance as at 29 February 2016. Also write down your vehicle’s KM balance as at 1 March 2015;

Step 4: Calculate the difference between the two balances in step 3 above, this will give you the total KMs travelled during the tax year;

Step 5: Deduct your private KMs travelled from this balance in step 4, to obtain your business KMs travelled for the tax year. Your private KMs travelled can be seen on your logbook;

Step 6*: Now calculated how much of the motor vehicle expenditure is attributable to business travel. This can be done by using the following formula:

Total motor vehicle expenses[1] multiplied by (Business KMs travelled[2] divided by Total KMs Travelled[3])

*The calculated amount in Step 6 will be the amount claimable as motor vehicle expenses in your tax return. This whole calculation will be disclosed in schedule 19 of your income tax return. The motor vehicle expenses claimable will then be included as a deduction under schedule 3 of your income tax return. It is important to remember that the expenditure being claimed, may NOT exceed the motor vehicle allowance received for the tax year.

Also note that you will have to retain proof of all the expenses claimed, and preferably submit this with your tax return, so Inland Revenue can verify the expenses you are claiming.

Remember if you use TaxTim to complete your tax return, then he will do all the calculations for you, no need to worry if it is correct.

 

[1] Step 1

[2] Step 5

[3] Step 4



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