Commission Earners - Time is Money

Commission earners under income code 3606 with no travel allowance may claim a deduction of the business portion of the expenses relating to their travel costs under code 4015. The number of taxpayers claiming this deduction have decreased by 47% in the 2016/17 tax year compared to 2010/11. The sharpest decline year-on-year was from 2015/16 to 2016/2017 (40%). The average business travel expense deduction has increased by 75% over the 7 years and could be the reason for the decreasing numbers.

Actual expenses are claimed instead of the SARS tables as is the case for travel allowances. The majority of estate agents and insurance consultants fall within this category. The business travel expense compared to total commission received has remained stable in the 30 – 35% level. 

The applicable SARS codes for commission earners are:

Income

  • 3606 – Commission “Travel Expenses (no allowance – commission only)”

Deduction

  • 4015      Deduction for Business portion of actual expenses

SARS Logbook Requirements

The minimum required logbook information:

  • Date of travel
  • Kilometers travelled
  • Business travel details (where to and reason for the trip)
  • Opening and Closing Odometer

Taxpayers have the option to record their travel manually and complete the sample logbook format from SARS

For estate agents and insurance consultants, the keeping of a detailed logbook can be a time intensive function as calling routes may differ due to canvassing and prospective meetings.

SARS 10 Year Statistics

Below is an extract of the applicable codes from the 2017 Tax Statistics – Personal Income Tax 10 year.

Only 8% of Commission Earners claimed a travel cost deduction in 2016/17, compared to previous period where the average was 12%. The average business cost claimed of R51 000 in 2016/17 increased substantially compared to the previous 6 years. The average commission of R146K in 2016/17 indicate income from other sources and a straight comparison to business cost claimed under code 4015 is impractical.

Analytics 10 Year Statistics

A deduction under code 4015 can be made if the commission earned is more than 50% of the taxpayer’s income. The above analysis are based on the assumption that only 10% of commission earners will fall in this bracket making up 25% of the total commission earned under code 3606. The average commission per taxpayer (R366K in 2016/17) do make theoretical sense hence the choice of parameters. A recent survey conducted within the accounting sector confirmed that a high number of commission earners do keep a logbook.

The majority (up to 90%) are written up by hand and the use of GPS technology is limited.

On average a real estate agent make 8 trips per day, using 15 minutes to write manually, or 60 hours a year