SARS is very aware of the fact that the current travel allowance system is open to abuse and that a large percentage of claims are fraudulent. There has been recent chatter that SARS may be looking to do away with the option of fixed travel allowances and suggestions that they may only allow business travel to be reimbursed at a fixed cost per kilometre. The current tax regime offers the reimbursive travel allowance as an option for employees. The system puts the onus on the employer to accurately determine the business travel undertaken by the employee and to then pay that at a rate per kilometre determined by SARS annually, or at a rate determined by the employer.
The taxing of the reimbursive allowance was fundamentally changed from 1 March 2018. Where an employee is reimbursed using a rate higher than the SARS prescribed rate, the difference between the SARS prescribed rate and the rate utilised by the employer will be subject to PAYE, regardless of the number of business-related kilometres travelled.
It is advisable that employers consider their reimbursement rates against the prescribed rate. An unintended consequence of reimbursing an employee on a higher rate will increase the employee’s PAYE liability and may result in lower employee take-home pay.
An alternative to avoid this possible occurrence would be for the employer to reimburse the employee at a rate below the prescribed rate of R 3.82 (R 3.98 in 2021) per kilometre. The reimbursement will not attract PAYE and will also not be taxable on the employee’s personal tax return. The simplicity of this approach reduces the reporting requirements associated with the reimbursement of business travel at a rate above the SARS prescribed rate.
HRTorQue can assist you with an evaluation of your current travel allowance and or reimbursement system. This will ensure that you are following industry best practice and that you are not at risk should SARS undertake an Employees Tax audit.