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Travel Allowance
What is a travel allowance?
- An allowance or advancement given by your employer for business traveling required by the employee i.r.o employment purpose for using your motor vehicle.
Note:
- The vehicle does not have to be in the name of the employee
- It can be your wife’s vehicle, cousin, any person, provided that person is not going to claim any traveling expenses i.r.o the same vehicle in his/her tax return
- You cannot get a travel allowance i.r.o a vehicle that is owned by your employer
- Traveling from Home to your Office is not business travel
- Once you receive a travel allowance, you must complete an annual tax return wherein you will need to justify your business traveling incurred
- If you traveled for business purpose less that 8000km’s for the year, then you have the option of using the 246c SARS rate to determine your business travel cost.
Who can get a travel allowance (who qualifies?)
- Any employee who is expected to incur traveling for work/business purposes
- Member of a CC or Director of a Private company is an employee for tax purpose
- A sole proprietor is not an employee thus do not qualify for a travel allowance
Examples of employment constituting a travel allowance
- A Site foreman that uses his own vehicle (or vehicle not supplied by employer) will receive a travel allowance because he has to visit different sites whole day.
- A Director of a Private company who uses his own vehicle to attend different functions and promote the company
- A Member of a CC who uses his own vehicle to do client visits
How is a travel allowance determined?
- Your employer determines the amount of traveling required
- Example
> You need to travel to clients or site visits 50% of your office time. You receive a salary of R 10,000 pm. Your package will then be structured as follows:
> R 5,000 basic salary and
> R 5,000 travel allowance.
What is the tax advantage of having a travel allowance?
- When determining your PAYE only 60% of your travel allowance is taxable.
- Example
> Using the same example above…. R 5,000 basic cash is fully taxed
> 60% your travel allowance is taxed…. R 3,000
> Therefore…only R 8,000 is subject to PAYE every month.
What expenses are claimable against your travel allowance?
• Business travel expenditure only.
• Travel cost from your office/place of employment to your clients/building site
How do you determine business travel expenses?
- Using actual numbers …you keep a logbook
- A logbook is any form of record, book, hardcover where you record every business trip you have done: date, mileage, distance, time, cost per km
- SARS has now formalise the logbook, you can get one of the SARS website
- Actual Business km’s and SARS cost per km
- You record the actual km’s travel but use SARS pre-determined cost per km
- Reimburse method
- Your employer reimburse you each time you complete a business trip
- Your employer has pre-determined rates and mileage schedules
- Using estimate numbers for business km and cost per km
- no record kept
- In this instance the SARS mileage and rate per km is used to determine business travel
- SARS allowed travel for the year end 28/2/2008: 32 000 km
- Private travel 18 000 km
- Business travel 14 000 km
Q&A about travel allowances
1) If I am the only member of a CC, how do I get a travel allowance?
A CC is a separate legal person from its member/s. You are trading via the CC. Since 1 March 2002, Members of CC’s are employees for tax purpose and subject to PAYE. You will determine how much traveling is required and then structure your salary accordingly.
2) Must I be the owner of the vehicle?
No. You do not need to be the registered owner.
Please note:
• The vehicle cannot be a company sponsored vehicle
• Two people cannot claim travel expenses i.r.o the same vehicle…. in other words…. if you are using your wife’s vehicle occasionally and she receives a travel allowance i.r.o that vehicle…when completing your tax return at year end, you cannot claim any business expenditure i.r.o that vehicle if she is also claiming business expenses i.r.o the same vehicle.
3) What if I only used my vehicle for part of the year?
If you did not keep proper records and decide to use SARS deemed km’s, you will have to apportion the km’s traveled. The fixed cost rate will also have to be apportioned.
4) What if I used two vehicles for the period?
You can claim business travel i.r.o of both vehicles.
Provided:
• No one else is claiming any business travel i.r.o those vehicles (refer point 2)
• The SARS Tax form makes provision for 2 vehicles
5) Does the value of my vehicle have any impact on my travel allowance?
Yes.
Remember:
• Only 60% of your travel allowance is subject to PAYE
• Having a vehicle with a low value and receiving a large travel allowance is to your disadvantage
Example:
o Cost of your vehicle R 40,000
o Total travel allowance for the year R 60,000 (R 5,000 pm)
o Business km’s for the year 10,000 km’s
o Using the SARS rate per km to determine your cost per km (period ending 28/2/2008):
Fixed cost: R 15,364/10000km 153.64c
Fuel cost 47.3c
Maintenance cost 22.5c
Business cost/km 223.44c
Business expenses (10,000km x 223.44c) R 22,344
Tax effect:
Travel allowance 60,000
Less: business travel expenditure 22,344
Net amount included in income 37,656
Using the same example but your vehicle cost is R 100,000
Fixed cost: R 36,978/10000km 369.78 c
Fuel cost 54.8c
Maintenance cost 30.5c
Business cost/km 455.08c
Business expenses (10,000km x 455.08c) R 45,508
Tax effect:
Travel allowance 60,000
Less: business travel expenditure 45,508
Net amount included in income 14,492
From this illustration we can clearly noticed the greater the value of the vehicle, the more advantageous it will be to utilize your travel allowance.
Provided:
• If you buying an expensive vehicle on Hire Purchase just to gain maximum out of your travel allowance, you will have to take into consideration whether the monthly repayment is worth the tax saving!
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