All About Travelling Allowance

When a travel allowance has been received, the employee must determine the allowable deduction for business travel.  There are two ways in which this could be done:

  • Using actual business expenditure (The value of the vehicle is limited to R560 000 for purposes of calculating wear and tear, which must be spread over seven years, while finance costs are also limited to a debt of R560 000.  For a leased vehicle the instalments in a year of assessment may not exceed the fixed cost component in the table);  or
  • Using a deemed cost per kilometre as per the following table:

2015 Travelling allowance-crop

Note:  The fixed cost must be reduced on a pro-rata basis if the vehicle is used for business purposes for less than a full year.

The actual distance travelled during a tax year and the distance travelled for business purposes substantiated by a log book are used to determine the costs which may be claimed against a travel allowance.

Employees’ tax is based on 80% of the travel allowance.  However, if the employer is satisfied that at least 80% of the use of the motor vehicle will be for business purposes, employees’ tax may be based on 20% of the travel allowance.

When the following criteria are met, no employees’ tax is payable on a reimbursive travel allowance paid by an employer to an employee:

2015 Travelling allowance 2

This alternative is not available if other compensation in the form of a travel allowance or reimbursement is received from the employer in respect of the vehicle.  In such an instance the reimbursive travel allowance will be taxable and expenditure for business travel could be claimed in the same manner as with a normal travel allowance.

Right of Use of Motor Vehicle:  When an employee receives the right to use a motor vehicle the following provisions apply:

  • Where the vehicle is owned by the employer, the taxable value is 3,5% of the determined value (Vehicles purchased before 1 March 2015: the cash cost including VAT;  Vehicles purchased on/after 1 March 2015: retail market value) per month of each vehicle.  Where the vehicle is the subject of a maintenance plan at the time that the employer acquired the vehicle the taxable value is 3,25% of the determined value.
  • Where the vehicle is rented by the employer, the monthly taxable value is equal to the actual costs incurred by the employer under the lease (rental as insurance for example) as well as the cost of fuel for the vehicle.
  •  80% of the fringe benefit must be included in the employee’s remuneration for the purposes of calculating  PAYE.  The percentage is reduced to 20% if the employer is satisfied that at least 80% of the use of the motor vehicle for the tax year will be for business purposes.
  • On assessment the fringe benefit for the tax year is reduced by the ratio of the distance travelled for purposes substantiated by a log book divided by the actual distance travelled during the tax year.
  • On assessment further relief is available for the cost of licence, insurance, maintenance and fuel for private travel if the full cost thereof has been borne by the employee and if the distance travelled for private purposes is substantiated by a log book.
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