Employees in South Africa who use their personal vehicles for work-related activities may find that employers offer financial support in the form of a travel allowance. This allowance is intended to help cover the costs of fuel, maintenance, and other car-related expenses incurred while performing work duties. While it forms part of taxable income, employees can often claim a portion of these costs as a deduction, reducing their overall tax liability. Travel allowances cannot be treated as a simple addition to your salary package; they must comply with the requirements and
provisions as set out by SARS.
A travel allowance is essentially a reimbursement mechanism for business travel using a personal vehicle, with two approaches available:
Fixed Allowance: A regular payment made regardless of actual distance travelled.
Reimbursive Allowance: Payment calculated based on the exact business kilometers driven, following rates prescribed by SARS.
When you receive a travel allowance:
- The payment is intended to cover expenses directly related to work travel.
- Only business use of the vehicle is deductible; commuting and personal trips are not.
- Employees are responsible for tracking their business kilometers and related expenses to justify any tax deductions.
Keeping Records
Accurate record-keeping is critical:
- Logbook: Document every business trip with details such as date, distance, and purpose. This serves as proof when claiming deductions.
- Receipts: Save invoices for fuel, maintenance, and insurance paid out of pocket.
- Calculation: Annual deductions are determined based on the proportion of business travel relative to total vehicle use.
Tax Implications
Travel allowances are treated differently depending on the type of allowance and usage:
Fixed Allowances
- Usually, 80% of the allowance is taxable under PAYE.
- If the employer can confirm that at least 80% of vehicle usage is for work, only 20% is taxable.
- These amounts are reported on the IRP5 form under code 3701.
Reimbursive Allowances
- Payments that do not exceed the SARS kilometer rate and are solely for business travel may be non-taxable.
- Any reimbursement above the rate or alongside another allowance is considered taxable income.
- Non-taxable payments are reported under code 3703
Company Fuel Cards
- Treated similarly to fixed allowances for tax purposes.
- Taxable amounts may be reduced if the majority of the fuel is used for work-related travel.
End-of-Year Considerations
When filing a tax return, employees reconcile the total travel allowance received with actual business expenses:
- Business-related costs can be claimed as deductions.
- Proper documentation, logbooks and receipts are essential to support claims.
- The SARS prescribed rate for reimbursements changes annually, so calculations must use the correct rate.
Practical Tips for Employees
- Maintain a comprehensive logbook of all business trips.
- Keep all fuel and maintenance receipts.
- Regularly review the SARS prescribed kilometer rates to ensure accurate deductions.
- Confirm with your employer the proportion of vehicle.
If an employer has any uncertainty regarding whether the above information applies to their employees, it is advisable to seek independent legal counsel for clarification. Employers may also contact us directly should they wish to discuss the matter further or require additional assistance: angelenes@praxima.com.
