The taxpayer received a relocation allowance from her employer which was taxed accordingly. The taxpayer is querying whether she can claim against the allowance in her personal capacity when attending to the tax return. Please advise if she can?
Important:
This answer is based on tax law for the tax year ending 28 February 2020.
Answer:
According to our understanding, code 3713 is the correct code to use – see the SARS guide to employers – for a taxable relocation allowance.
The relevant law is found in section 10(1)(nB)(ii) of the Income Tax Act. For years of assessment commencing on or after 1 January 2016 it reads as follows:
It exempts from normal tax “… any benefit or advantage accruing to any employee (as defined in paragraph 1 of the Seventh Schedule) by reason of the fact that his employer (as defined in the said paragraph), has, in consequence of the transfer of the employee from one place of employment to another place of employment or the appointment of the employee as an employee of the employer or the termination of the employee’s employment, borne the expense—
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of transporting such employee, members of his household and the personal goods and possessions of himself and the members of his household from his previous place of residence to his new place of residence; or
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of the costs which have been incurred by the employee in respect of the sale of his or her previous residence and in settling in permanent residential accommodation at his or her new place of residence; or
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of hiring residential accommodation in an hotel or elsewhere for the employee or members of his household during the period ending 183 days after his transfer took effect or after he took up his appointment, as the case may be, if such residential accommodation was occupied temporarily pending the obtaining of permanent residential accommodation;
Basically, the sub-section requires that the employer must have ‘borne the expense’. The issue is therefore whether or not the payment of an allowance would constitute the employer having borne the expense – i.e. the meaning of the word ‘borne’. It is only in item (ii) that it refers to “the cost incurred by the employee”.
The employer reflected the allowance as taxable because the employee didn’t bear the expenses.