This week we zoom into Wear and Tear also commonly known as Depreciation. Below we've covered some of the top questions we've received from our Helpdesk. Take a quick read through our Q&As and see how your pressing depreciation questions can potentially be solved.
1.What is wear and tear or depreciation?
Wear and Tear is the tax term for the decrease in value of an asset as it gets used. For accounting purposes, this write-off or decrease in value is sometimes referred to as depreciation. SARS allows you to deduct this decrease each year based on a number of years depending on the type of asset (i.e. asset class) that's being written down. Please see TaxTim’s handy Wear and Tear calculator to help you calculate the deduction.
2. I'm a sole proprietor. Can I claim depreciation for my car if I have kept a logbook?
Yes, you'd be able to depreciate your car over five years, but you'd to apportion this expense based on the ratio of business to personal mileage. You can work this ratio out based on the kms recorded in your logbook. You'd then need to also apportion your other fuel and car expenses by the same ratio (i.e. percentage) and deduct those costs as well.
You need to have proof of the fuel, insurance and maintenance costs incurred for the year, so remember to keep all of the invoices/ receipts. It's important to understand that sole proprietors may only claim their travel deduction based on actual travel expenses and aren't allowed to claim using the ‘deemed’ method. Please refer to our Travel Deduction Calculator for help with the calculation.
3. Can I claim financing costs (interest on my car finance) and depreciation on my vehicle?
Yes, these costs can be claimed under certain circumstances only: if you receive a travel allowance, or you are a commission earner or if you're self-employed. In addition, you'd to travel for business and record your mileage in a logbook. If you only earn a salary however, you cannot claim the financing costs (or any other vehicle costs) on your private vehicle. Please use our handy Travel Deduction Calculator to assist with your workings.
4. I receive a travel allowance - can I claim depreciation on my vehicle?
You'd be able to claim depreciation on your vehicle but would need to prove to SARS the basis for apportioning expenses between business and private use by keeping a vehicle logbook. You need to complete the details of your car and mileage in the travel allowance section of your return.
5. Can I claim depreciation on furniture as an expense against rental income?
If you have fitted out your rental property with furniture (such as tables and chairs and beds) these items will need to be replaced eventually, as damage builds up, and that will be a future cost to you. SARS allows you to "depreciate" these items now, in the years leading to their replacement, and this future cost can be declared as depreciation in the rental section of your ITR12 to help reduce the tax payable. We've included our Wear and Tear Calculator to assist with your calculations.
6. How do I work out the depreciation if I only used the asset for a few months?
You can divide the total amount you received from the Wear and Tear Calculator by 12 and times it by the number of months you used the asset.
7. I use my laptop for both business and personal use. How do I work out my depreciation claim?
You'll need to estimate your % business to personal usage and claim accordingly. As that may vary from person to person, you'd need to please make use of our Wear and Tear Calculator to assist you with your calculations.
8. I'm a salaried employee and use my personal laptop and cell phone for work purposes. What documents do I need to submit to SARS in order to claim wear and tear on it?
You'll need to submit:
Laptop and cell phone invoice
Calculation showing how wear and tearwas calculated and apportioned between business and personal use
Letter from your employer stating you can use your personal laptop and cell phone for work
9. Does an extended warranty on a car affect the wear and tear claim?
The wear and tear needs to be calculated based on the cost price of the car i.e. purchase price. If the extended warranty is included in the purchase price, then this total amount would be written-off over the prescribed SARS wear and tear period for cars i.e. 5 years. Please see our Wear and Tear calculator
10. My husband bought me a cell phone and I use it for business purposes only. My employer gives me airtime each month, can I still depreciate the phone?
You unfortunately can’t claim a deduction for the depreciation of the asset because you didn't incur the cost yourself (i.e. you didn't purchase it and therefore it's not owned by you).
11. I do some part time administrative work for a company. They pay me for the hours that I work, but I use my own printer, laptop, cell phone and stationery to do the work. Can I claim a deduction for these expenses on my tax return? They pay me into my bank account each month without deducting any tax.
Yes, you can claim a deduction for these expenses on your tax return. You need to depreciate the printer, laptop and cell phone. Please use our Wear and Tear Calculator to see how this is done. You can also claim a deduction for the stationery on your tax return. All of these expenses need to be reflected in the Local Business Income Section of the ITR12, together with the income you earn from the company.
12. I'm a salaried employee. My company reimburses my business mileage based on the SARS prescribed rates. This reimbursement is coded to 3703 on my IRP5. Can I claim wear and tear on my car?
If you were reimbursed for your mileage then the wear and tear has been calculated in that per KM rate so you cannot claim wear and tear as well.
13. Is it possible for me to claim depreciation on my personal car which I use to go to work? I don't receive any travel allowance.
If you're a salaried employee and you don't receive a travel allowance, then you cannot claim any travel expenses. However, please note that travel between home and your place of work is always considered personal mileage, so even if you did receive a travel allowance, you cannot not include these trips as part of your calculation to work out the travel deduction.