[FAQ] Income tax on commission earned

[FAQ] Income tax on commission earned

• 30 November 2020
• Individuals Tax
• Piet Nel

Background

A taxpayer earns an average monthly commission of R30,000. He contributes to a medical aid, his monthly vehicle loan repayment is R2,214 and he service his vehicle twice a year. His average monthly fuel is R1,800 and he also pay his monthly phone bills.

How would his income tax be calculated?

Answer

Income Tax Act

You are reminded that SAIT's technical query system policy prescribes that only guidance should be provided in relation to requests submitted. To do otherwise would cause SAIT to compete with its own members. Guidance implies that sources or references relevant to the request are provided, but that ultimately the tax practitioner’s own professional judgment is required to be applied to the specific circumstances. SAIT can’t ‘advise on how to compute the’ taxable income or assessed tax.

For purposes of the guidance that follows we accept (as you indicated) that the individual derived income, by way of commission only or in the course of any trade carried on by him or her independently of the person by whom such amount is paid. It is therefore accepted that section 23(m) of the Income Tax Act doesn’t apply.

The individual would then not be limited and would be able to make the deductions available in terms of the legislation. This is because the individual is carrying on trade and any expenditure, loss or allowance, contemplated in section 11, doesn’t to any employment of, or office held by the person. The total must then be adjusted for private use (section 23(a) or (g)). The income (commission earned) and expenses are declared in the business or trade part of the return of income.

With regard to business travel, the deduction should have been 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 should then have been adjusted for private use (based on the logbook) – section 23(a) or (g). The business use of the vehicle must be supported by a logbook.

Contributions to a medical scheme does not qualify for a deduction, but the section 6A rebate is available

Webinar Commentary

Further webinar commentary on 360 Degree View Of Individual Taxpayers can be accessed here.

0 COMMENTS

LEAVE A COMMENT