With tax season approaching, many corporate travellers are digging out all those airline boarding passes, fuel slips and receipts from travels over the past year.
As a frequent business traveller, you’ve likely accumulated quite the collection in hopes of a decent refund on allowable expenses.
However, the taxman wants more than a shoebox stuffed with crumpled receipts.
According to business travel expert and Corporate Traveller GM Bonnie Smith, you may be unsure what expenses the South African Revenue Service (Sars) considers legitimate deductions, and trying to write off an extravagant stay at the Saxon Hotel or a lavish meal at Greenhouse would probably raise some red flags.
“While business travel allows for some indulgences, it’s no excuse to go overboard. Understanding what Sars deems reasonable expenses allows you to plan work trips without stressing over compliance,” she said.
Smith said there is no need to subsist solely on airport pies and garage coffee when on the road for business, and by getting familiar with Sars’s criteria, you can navigate tax season smoothly.
So here are some expert tips from Smith to help you stay on good terms with Sars when on business trips.
Know which deductions are legitimate
According to Smith, travel expenses are considered a type of business expense, and business-related expenses can be legitimately claimed. However, there are specific conditions and limits for claiming travel expenses from Sars.
She said you can only claim travel expenses from Sars if you receive a subsistence allowance from your employer, which covers meals, parking, and other costs, or if you earn commission and more than 50% of your total remuneration comes from that commission as the allowable expenses vary based on your position and the nature of your travel.
For instance, if you’re a high-level executive like Thabo from the C-suite, you may be able to claim expenses for business-class flights and five-star hotels.
However, if you’re an employee like Sipho from accounts, the maximum allowable amount for meals and incidental costs per night within South Africa is R548.
Different limits apply for foreign travel.
“No record keeping is required for spending up to this amount. This means that if you spend within the allowable limit, you don’t need to itemise your meal expenses.
“You can choose how to allocate the funds, such as paying for dry cleaning or tips, but your meal allowance may only cover some of your costs, especially if you indulge in expensive items like single malt whiskies. Any additional expenses beyond the allowance must be paid out of pocket,” said Smith.
She also said that you can only claim basic travel expenses and Sars will scrutinise the time, place, and purpose of your travel to ensure you’re not on the road for personal reasons, such as testing mattresses at upscale B&Bs unless that’s actually your job.
“The rules for claiming travel expenses may vary depending on whether you work for a large company or are self-employed, a contract worker, or a small business owner.
“In large companies, deductions are often straightforward, while self-employed individuals may have more flexibility but also face additional requirements and scrutiny,” she highlighted.
Document your travel expenses
Smith also said that documenting your expenses will increase the chances of a successful tax claim, so it is advisable to keep physical receipts that clearly show the date, amounts spent, and itemised details of the purchases.
“Using your personal vehicle for business is different from using a company car. You’ll need to record your car’s odometer reading on March 1 (the start of the new tax year) and maintain an accurate logbook detailing your business and personal trips throughout the year,” she said.
The business travel expert also said that you can claim expenses related to fuel costs for business trips, but not for commuting between home and your office, as those are not considered direct business expenses.
However, if you work in an office but occasionally visit clients 50km away, those trips could be deductible expenses, so it’s best to consult a tax expert.
“Although keeping meticulous records is time-consuming, it will simplify the process and can significantly reduce your taxable income.
“Maintain all necessary documentation and file or digitise what you can if Sars decides to conduct a tax audit. A shoebox full of crumpled receipts won’t soften the taxman’s heart,” she said.