The new issue of this Interpretation Note has recently been released by SARS. Issue 3 includes commentary and examples of the calculation of the deduction from subsistence allowances, as well as a new section dealing with travel allowances.
This new draft interpretation note importantly now deals with the meaning of the phrase ‘obliged to spend at least one night away from his or her usual place of residence in the Republic’. The interpretation note refers to ITC 1668 in which the court distinguished between employees who lived far away from their place of employment and were given an accommodation allowance, and the situation where performing the duties of employment required the employee to spend nights away from home.
In respect of travel allowances, the draft interpretation note gives examples of what constitutes business travel and private travel for purposes of the deduction for business travel expenses, and states that the location of a recipient’s place of employment or place of business is a factual enquiry.
As an example:
- An employee who works for a restaurant in the Gateway Centre for 3 days a week and then the Pavilion branch for 2 days a week would regard travel between their home and either store as being regarded as private travel.
- Where the employee normally works at the Gateway branch but periodically travels to Gauteng to assist with the opening of branches there would regard this travel as business travel.
The taxing of this travel allowance can take place in one of two ways. The employer can either include 80% of the travel allowance in remuneration for taxation purposes or if they are satisfied that at least 80% of the use of the motor vehicle is will be for business purposes, only 20% of the travel allowance or advance is included in remuneration and is subject to employees’ tax.
The word ‘satisfied’ suggests that the employer must actively look into the facts of each employee’s circumstances, and objectively weigh up and apply their mind to whether or not the employee should qualify. This can be done by regularly reviewing employees’ logbooks, and taking into consideration changes in the role or function of the employee.