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What you need to know about tax and your travel allowance

Jun 30 2019 12:44

A travel allowance is given to employees who travel for business purposes, and it is granted to finance a portion of an employee's transport costs.

Many payroll professionals, however, struggle to come to grips with the South African Revenue Service's (SARS) travel allowance system.

Employees are notoriously lax when it comes to record-keeping of their work travels, says Sumeshan Nair, executive committee member at the South African Payroll Association (SAPA).

Travel allowance vs. reimbursed travel

A fixed travel allowance and/or company petrol card should only be issued to employees who are required to do substantial business travel. It is recommended that companies assess travel allowances issued to employees on an annual basis to ensure that the allowance paid is in line with business kilometres travelled.

There are various factors which influence this calculation and emloyers are advised to consult SARS guidelines in this regard.

Should the business travel be incidental, then companies should use the reimburse travel option.

While a travel allowance is reported against the IRP5 code 3701, reimbursive travel is reported against IRP5 code 3703 if reimbursements are below the SARS recommended rate and IRP5 code 3702 codes if reimbursements are made at a rate higher than the SARS recommended rate.

Only the portion above the SARS recommended rate should be allocated against IRP5 code 3702.

Reporting travel allowance and reimbursements correctly to SARS is crucial as it could have a negative impact on employees and result in employees having to pay into SARS on assessment," says Nair.

"Companies have the ability to tax a certain portion of the travel allowance paid to employees, a process which is facilitated by most payroll systems."

Most employers choose to tax 80% of the travel allowance paid to employees as a precaution and in the best interests of both the company and the employee.

Requirements to claim deductions

Employees need to meet a number of requirements in order to claim travel allowance from SARS. Some of these requirements include a record of the total distance travelled for business and personal use and proof of expenses that are to be retained.

Employees can deduct costs related to wear and tear of their vehicle, maintenance and repairs, vehicle license costs, insurance costs, and finance charges.

"It is important to note that an employee cannot claim deductions against a travel allowance if they receive the right to use a company car. Travel between an employee’s home and place of work is also regarded as private travel, for which you cannot claim money back from SARS," says Nair.

Nair notes it is not a payroll manager's responsibility to scrutinise an employee’s logbook or make sure that employees are maintaining their logbooks.

"Employees need to keep their logbooks up to date and ensure their submissions to SARS are 100% factual. A template for the logbook is available on the SARS website. I recommend that employees download this for use as it indicates all details required by SARS for the purpose of claiming a deduction. Employees should keep this on hand at all times so that they get into the habit of updating it as they travel," says Nair.

tax  |  money
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