Commission Earners - does the following count for deductible expenses? I have a client who works a Travel Agent and mainly and normally receives income in form of commission - he is getting paid a small basic salary. During this tax year his commission ea
Important:
This answer is based on tax law for the year ending 28 February 2020.
Answer:
For purposes of the guidance that follows we accept that the individual derived income (by way of commission) which was subject to employees’ tax. In other words, the taxpayer derived remuneration and the issue relates to the application of section 23(m).
The words used in section 23(m) are “…whose remuneration is normally derived mainly in the form of commissions based on his or her sales or the turnover attributable to him or her…” It makes no reference to a year of assessment and the previous year’s commission and other remuneration can therefore also be taken into account. The current SARS practice generally prevailing is that “the test for “normally” is a subjective test and each case must be evaluated on its own merits, with due regard to the taxpayer’s previous and future years of assessment.”
On that basis, the fact that the more than 50% requirement was not met in the most recent year of assessment would then be irrelevant if it was met cumulatively over the previous years of assessment.
The individual would then not be limited and would be able to make the deductions available in terms of the legislation. Of course, if there is private use, the necessary apportionment would be required. The relevant deductions would, for example, be made under section 11(a), 11(d) and / or 11(e). It would of course depend on the nature of the expense.
With regard to business travel, the deduction must be based on the actual cost, which would include expenditure on fuel, insurance, finance, maintenance and wear and tear (in other words, under section 11(a), 11(e), 11(d) and 24J where applicable). The total must then also be adjusted for private use (based on the logbook) – section 23(a) or (g).
The completion of the return of income would probably qualify as a necessary concomitant expense and would come in under section 11(a) to the extent that it doesn’t relate to private or non-trade activities.