Paymaster Magazine

Employee travel allowance – Best solutions

Scenario: No car allowance is paid and the employ does not have a company car, but does a limited amount of travel for business purposes and claims money back from the company.

Paymaster recommends: all travel reimbursement should be paid through payroll so than an accurate record can be kept and, if appropriate taxed, accordingly.

Where the distance travelled for business purposes does not exceed 8 000 kilometers per annum, no tax is payable on an allowance paid by an employer to an employee up to the rate of 330 cents per kilometer, regardless of the value of the vehicle. This alternative is not available if other compensation in the form of an allowance or reimbursement (other than for parking or toll fees) is received from the employer in respect of the vehicle.

Once the employee exceeds the 8000 km a year or is paid more than the R3.30 per km rate then the amounts need to be taxed as a fringe benefit.

The table hereunder shows in which circumstances a travel allowance is subject to employees’ tax and the relevant code under which it must be reflected on the IRP 5 certificate.

Scenario Must PAYE be deducted? Code
A fixed allowance is paid. Yes 3701
Fuel and expenses paid by the employer (e.g. petrol, garage and maintenance cards). Yes 3701
Reimbursed at not more than the prescribed rate per kilometer and travels not more than 8 000 kilometers. No other travel allowance is received. No 3703
Reimbursed at not more than the prescribed rate per kilometer and travels not more than 8 000 kilometers.  Receives a travel allowance or certain expenses are paid for by the employer. No (reimbursement)Yes (fixed allowance) 37023701
Reimbursed at not more than the prescribed rate per kilometer and travels more than 8 000 kilometers.  No other travel allowance is received No 3702
Reimbursed at not more than the prescribed rate per kilometer and travels more than 8 000 kilometers.  Receives a travel allowance or certain expenses are paid for by the employer. No (reimbursement)Yes (fixed allowance) 37023701
Reimbursed at a rate exceeding the prescribed rate per kilometer. No 3702

 

Adrian Baillie-Stewart

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