Save yourself tax with a car allowance. Picture: CarAdvice.
FAQ: Can I write my car off to TAX?
With tax season around the corner, here’s how your car can help reduce your tax.
Save yourself tax with a car allowance. Picture: CarAdvice.
If you are a self-employed person who pays for and runs a vehicle to earn money, we have good news. There are ways to help reduce your annual tax contribution through your car.
No one scenario is the same, of course, but let’s say you’ve bought and are paying off your car. You pay annual license fees, incur petrol costs each month, keep up with your maintenance and have even doled out for a minor repair. Here’s what you can do ..
CAN I WRITE MY CAR OFF TO TAX?
If this situation fits the bill, you are indeed running up costs that can be legally claimed as work-related travel and wear and tear on your vehicle, confirms Old Mutual.
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SARS tax laws say taxpayers can claim a business expense if it’s linked directly to generating income. Old Mutual confirms that is the case if your expenses – maintenance, fuel, etc – are not of a ‘capital nature.’ That’s to say it must form part of your income-earning structure for your business, and nothing else.
KEEP AN ACCURATE LOGBOOK
This is where it gets complicated. If you want to claim tax against your car, you need to keep a detailed logbook. It is known as a SARS Travel e-log book. The most recent one for 2023-2024 can be downloaded HERE.
1. You need to record your motor vehicle’s odometer reading on 1 March – the first day of a tax year. And keep the logbook up to date throughout the year. SARS notes that it is not necessary to record details of private travel, only your business travel.
2. You must note your car’s kilometre mileage on the last day of the tax year, February 28/29. This will allow you to calculate your total kilometres for the full year and your total business kilometres travelled.
3. As noted, in addition to keeping an accurate log book of your mileage, you must keep an accurate record of all your expenses, too. This is fuel, oil, repairs and maintenance, car license fees, insurance, and any finance charges or lease costs.
WHAT DO I CAPTURE IN MY TRAVEL LOGBOOK?
It’s simple, and it’s all laid out for you in the opening pages of the SARS Travel e-log book. In respect of every business trip, you must record the following:
- Date of travel
- Kilometres travelled
- Business travel details (start and end point and reason for the trip)
HOW DO I CALCULATE THE CLAIM FOR MY CAR USAGE?
It’s all explained clearly in the introduction section of the SARS Travel e-log book, but you can calculate your claim based on the cost-scale table in the book.
- The cost of purchasing the vehicle is NOT deductible because it is an expense of a capital nature. However, there is a wear and tear allowance of 20% of the vehicle’s cost as an annual deduction over five years. Refer to the book for detailed provisions.
- Your travel between home and your place of work CANNOT be claimed for business purposes, as this is regarded as private travel. Similarly, trips to a holiday destination are not for business.
- A separate logbook must be kept for each vehicle where more than one has been used for business travel during the year.
- Keep your logbook accurate to support a claim and you must keep these books for five years.
DO NOT TAKE ANY CHANCES
Old Mutual reminds us, as with all tax deductions, your records must be up to date and under no circumstance should you try to exploit the system.
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If anything seems unrealistic or suspicious, you could face an audit from SARS, and that will definitely not be worth the trouble of trying save a few Rands each year.
This article is for informational purposes only and should not be construed as financial, tax or legal advice. For further details consult SARS the website or get in touch with a tax specialist.
