Firstly, a big thank you to every person out there who read the first edition of Evidence is Key in our previous issue of UKnow. It keeps me motivated to keep on writing and I hope to help someone somewhere.
This follow-up article deals with information requested from an individual taxpayer, while my next article will focus on trusts, BUT remember that SARS can ask these questions for any type of taxpayer.
1. Vehicle and Travel Costs
Much has been said about motor vehicles and travel claims, and I hope I am not repeating myself. If so, please consider this a reminder. Below is a typical calculation for motor vehicle expenses incurred by an individual taxpayer.
(Click to enlarge image)
If you look at the above calculation, what supporting documents would be required of the individual taxpayer?
The cost price of the vehicle: SARS wants a signed purchase agreement, as well as an invoice – not a quote. If you only have an unsigned copy of the purchase agreement, you will need to provide 3 months statements showing repayments, or a letter from the financing institution confirming the amounts on the electronic agreement. So to make things easy, please make sure you have a signed copy of the agreement.
I quote the following SARS question received:
“Supporting Documentation Required: Kindly provide the following invoices / calculation and supporting documents is requested: Donations and depreciation as well as all documentation regarding business expenses that is taken into account and calculation regarding travelling.”
If we look at the above calculation, the taxpayer will need to provide the following:
Bank Charges: This will be indicated on the monthly statements of the financial institution.
Fuel: Please keep you receipts! Some of the receipts do fade over time, so make sure you can still read it. Even better, scan the receipts and keep them as electronic records while they are still new. (Nowadays some fantastic software is available to scan all documentation and keep it for record purposes or serve as the basis for cloud accounting and bookkeeping. Please contact us for more information on this.)
Depreciation: The purchase amount (cost price) will be confirmed on the signed purchase agreement and invoice. If you cannot claim the VAT on the purchase of the vehicle, the VAT forms part of the cost price.
Repairs and Licenses: These will be amounts paid for example the services of the vehicle, replacement of tyres and the vehicle license fee. All original invoices must be kept.
Finance charges: SARS is not always satisfied with an amortisation schedule – they want either a letter from the financial institution confirming the amount of interest incurred, or a tax certificate confirming the interest amount. Make sure you receive this every year, as some financial institutions close the account when the loan amount is repaid and cannot access the information at a later stage.
Insurance: An insurance contract can be a lengthy document, so we usually send SARS only the page of the insurance contract that reflects the amount for the vehicle we claimed. However, SARS may request the entire original contact for verification.
2. Other Regular Deductions
Donations: Please note that only donations for which you have received a valid original section 18A certificate can be claimed as a tax deduction.
Medical Expenses: There is a guide on the SARS website on how to determine the amount of medical expenses that can be claimed as a tax deduction, what to include in this amount and what not. This topic can be a newsletter on its own! The short version is: You will need all invoices and proof of payment of all out-of-pocket expenses not covered by your medical aid fund. Note non-prescription medication is not tax deductible.
As per my first article….remember that the taxpayer bears the onus of proving that an expense was incurred in the production of income. The golden rule is: If you want to claim it, you need to prove it. So make sure that your supporting documents are complete and correct.
Petro van Deventer