Explanation of S8(1)

Question 1

Explanation of S8(1)
- what are we trying to acheive

Answer 1

Section 8(1) covers travel allowances, subsistence allowances, and other allowances received by virtue
of the recipient’s offices or duties. This section provides that these allowances be included in taxable
income after deducting or excluding certain amounts – i.e. reductions. These reductions are mainly
for business expenditure.

SARS wants to tax the private portion of the allowance received
or accrued, since this is the real benefit received by the employee

NB!! The employee is required to spend at least
one night away from home to qualify for any reduction of this inclusion(SUBSISTENCE ALLOWANCE)

Question 2

Travel allowance
Deemed rate

Answer 2

The business reduction under section 8(1)(b)(ii) relates to actual costs incurred or a deemed rate per
kilometre for a travel allowance received (e.g. R4,000 per month allowance). The deemed rates per
kilometre are updated annually.

Question 3

Simplified method

Answer 3

The reduction under section 8(1)(b)(iii) relates to a reimbursive allowance (e.g. 361 cents per
kilometre) and is based on the deemed rate per kilometre for reimbursements, and is referred to as
the “simplified method”. A reimbursive allowance is included in income to the extent that it exceeds
the prescribed rate under the simplified method.

Question 4

Anti provision measure

Answer 4

There is an anti-avoidance section in section 8(1)(b)(iv). It states that where a vehicle is owned or
leased directly or indirectly by taxpayer, spouse or child, and is let to their employer:
* Rental and other expenditure paid by the employer to the employee is deemed to be an allowance
paid to that employee; and

• The rental is deemed not to have been received by or accrued to the employee, therefore the
  employee cannot claim any deductions (e.g. s11(e)).
• This does not prohibit the employee from reducing the amount of the allowance by business
  expenses (this is a reduction and not a deduction).
• The employee is deemed not to have been given the right of use of the motor vehicle, so there is
  no additional fringe benefit.

Question 5

Exam technique

Answer 5

show all the options that are available to the taxpayer before applying the one that results in the greatest
reduction.

Simplified / deemed cost

Question 6

when given costs then we calculate cost of vehicle using fixed car …?

Question 7

Subsistence allowance

Question 8

Need of expansion is S23m

Answer 8

If the individual is an employee, then the deductions they are entitled to is limited by section 23(m),
unless the deductions relate to another source of income