Author: Dave Beattie
An employer paying for an employee’s daily commute to and from work is generally a taxable benefit for the employee. However, there are circumstances where this practice is regarded as a ‘no-value’ fringe benefit.
SARS issued Binding General Ruling 50 on the 18th March 2019 to confirm that the transport service provided to employees for travel between home and the workplace can be a non-taxable fringe benefit if it meets specific requirements. This “no-value” provision applies under these conditions:
- The transport is provided directly by the employer, using a vehicle and driver on its payroll.
- If the service is outsourced to a third-party transport provider, the contract must be between the employer and the service provider, not the employees.
- The transport must be offered exclusively to employees along pre-determined routes and cannot be requested on an individual or ad-hoc basis. This means that pick-up and drop-off points are established and employees are required to get to and from those points to take advantage of the transport provided.
- The transport must be available to employees in general. This includes situations like shift work requiring travel outside of standard hours.
If the transport that is provided by employers does not meet with the above criteria, then the employee will be receiving a taxable benefit. Examples include:
- Paying for public transport:If an employer reimburses or pays for public transport, such as bus and train tickets or taxis fares, it is a taxable benefit.
- Providing a transport allowance:A transport allowance given to employees to use for public transport is a taxable fringe benefit.
Employers must be able to differentiate between the ‘no value’ travel fringe benefit and the taxable options. A misinterpretation may result in tax being short-paid and there being additional tax, a late payment penalty, and interest levied by SARS.
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