Do this one thing to 'audit-proof' your relocation costs
Relocating an employee can cost you a fortune especially if it's to another province or country. For example, you may have to deal with:
• Moving expenses (transporting your employee and his household);
• Hiring professional movers;
• Costs of boxes and packing material;
• Fees to break the lease if your employee's renting; and
• Temporary storage costs until your employee finds a permanent home.
In addition to these costs, you also have to worry about the tax consequences because if you make one wrong move SARS will audit you and slap you with penalties.
But it's not all doom and gloom.
You can 'audit proof' your relocation costs if you do this one thing...
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'Audit-proof' your relocation costs with this tool
The best way to 'audit-proof' your relocation costs is to have a policy that deals with relocation payments.
This is vital if SARS decides to do an audit on either your payroll or your company income tax.
Remember, tax law says if you think an amount qualifies for deduction from taxable income or is exempt from income tax and you claim it as a deduction, you have to prove it to SARS.
Your policy will come in handy when it comes to this.
It'll help you prove your relocations costs are above board. In addition, it'll help you claim relocation expenses correctly.
If you want a sample policy, check out the Practical Tax Loose Leaf Service.
In addition to your policy, keep all supporting documentation for five years after the end of the tax year that you transferred an employee.
This will help you prove your expenses in case SARS audits you.
There you have it: The only way to 'audit-proof' your relocation costs is to have a policy that deals with relocation payments.