When an employee is reimbursed for business travel, it is important for an employer and an employee to carefully look at:
- The rate at which they are reimbursed.
- The projected kilometres to be travelled.
- An accurate logbook must be kept.
In a case where you state that an employee is reimbursed at a rate higher than the prescribed rate, but travels less than 8000 kilometres per year, you need to take note of the following:
- The only real difference this will make on your payroll is the IRP5 code against which the reimbursement is reflected. In all cases, the reimbursement is tax-free on the payroll. In the case where the prescribed rate is exceeded or the 8000 km is exceeded the Commissioner states that the reimbursement will be taxed on assessment.
- When either the prescribed rate or the kilometre limit is exceeded the IRP5 code against which the reimbursement should be reflected is 3702, otherwise 3703 should be used.
- When an employee is reimbursed for business travel it is very important to ensure that the employee keeps an accurate logbook of his/her business as well as private travel, as this will become the documentation that SARS will review on assessment.