Will it be allowed by SARS if a sole proprietor give themselves a travel allowance from their business which they then claim a deduction against with a logbook? They will not be depreciating the vehicle that they drive. Or will SARS only allow the sole proprietor to deduct actual expenses incurred for travelling and depreciation for the vehicle? The latter will be less tax beneficial.
Important:
This answer is based on tax law year ending 28 February 2021.
Answer:
We do not agree with your view. The tax consequences follow from the nature of the person and the entity type that is in issue here. In order to give an allowance, there must be two persons, the principal and the recipient (see section 8(1) of the Income Tax Act). Typically the principal is an employer. A sole proprietor cannot be his or her employee either. The individual must base the amount of the deduction on actual costs (section 11(a), (d), (e) and 24J) actually incurred and make an adjustment in terms of section 23(g) for the private use element. The adjustment, under section 23(a) or 23(g), in respect of non-trade related travel, such as private travel, must be based on a log book.