Holes in one on the Taxman?

It will come as a pleasant surprise for many taxpayers to learn that they could play golf on the Taxman! "Buried" in a section of the South African Income Tax Act under the heading "18. Deduction in respect of medical and dental expenses.", is a provision which opens the door for certain golf related expenditure to be deductible for tax purposes.

Broadly, any expenditure (other than recoverable expenses) necessarily incurred in consequence of any physical disability suffered by the taxpayer, his or her spouse or child is deductible for tax purposes (subject to limitations in certain circumstances). This would include capital expenditure and because it applies to "any expenditure" the amounts don't need to be medical or dental expenses. Also, Section 18 expenses can be deducted even if the amounts are not in the production of income and/or are expenses of a personal nature.

Consider the situation where a taxpayer, Mr Smith, has an artificial limb a "handicap" for tax purposes which allows him to deduct the cost of his whole familys qualifying Section 18 expenses. Smith has another "handicap" - 5. That is, his golf handicap is 5. Because of his physical handicap, Smith requires a golf cart in order to play golf.

A number of questions arise. Can Smith claim a deduction for the cost of the golf cart on the basis that it is necessary because he is, following his accident, no longer able to walk around the golf course? Will SARS allow it? If so, will they allow a deduction if Smith buys an expensive cart, or would the deduction only be available for the cheapest cart? What other expenditure could Smith claim because of his disability? Could he claim for special golf clothing he needs in order to play? Can the cost of his expensive golf clubs be deducted? Can his caddy fees be deducted? What about his golf subscriptions, green fees and travel expenses incurred by him in getting to and from his golf course? Can Smith re-open previous years assessments because he was not aware he could claim for all his qualifying Section 18 expenses?

Consider taxpayers over the age of 65, who because of heart problems, for example, require golf carts and caddies in order to play golf. Again, the question is whether the cost of the cart and caddy fees will be allowable deductions. What about the cost of a full-time driver for a blind person, his caddy fees and cost of golf cart?

As there are so many other physical disabilities (such as bad eyesight, hearing problems, diabetes, asthma, arthritis, knee or back problems, brain dysfunction etc), taxpayers may want to think laterally to consider what expenditure they could possibly deduct under this wide ranging provision of Section 18 (for example, travel expenses incurred in going to visit eye specialists, surgeons, doctors etc)

The issues are not clear in all cases and whether or not the expenses are deductible will depend upon the precise facts and circumstances of each taxpayer. Relevant case law and the legislation applying at the time will require careful consideration. But, suffice it to say that it many circumstances the costs could be deductible. Because of the potential large tax savings, taxpayers would be advised to take specialist tax advice in order to maximize their tax deductions for the 2007 tax year, and to plan for the 2008 tax year. It may also be possible for taxpayers to re-open previous years assessments.

So, in short, it may be possible to get a hole in one on the Taxman! But, the advice is not to push your luck and try to deduct the costs of the after round drinks for your hole in one. It would be difficult to successfully argue that the expense is necessarily incurred in consequence of your physical disability!

Written by Eugene Bendel ebendel@postnet.co.za
Bendels Consulting