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Travel Allowances - What Is All The Fuss About?

20 August 2010   (0 Comments)
Posted by: Author: Claire Barnes
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Travel Allowances - What Is All The Fuss About?

The recently amended travel allowances legislation has generated a lot of interest from employees in receipt of a travel allowance. The reason appears to be that, although employees seem to understand that the PAYE withholding on travel allowances has increased from 60% to 80%, they do not know what they themselves need to do in order to avoid trouble with SARS.

A travel allowance is an amount paid to the employee in anticipation of business travel to facilitate the use of the employees’ private vehicle and ensure that the employee gets fairly compensated for the personal expense associated with the use of their private vehicle for business purposes.  If you’re an employee receiving a travel allowance, you need to start by asking yourself the question: "Do I actually travel in my car for business purposes?" Travelling from your home to the office and back doesn’t count. If the answer to this question is ‘no’, then in terms of the law you are not entitled to a travel allowance, regardless of your company’s policy. You would need to approach Human Resources and discuss how to restructure your salary package, possibly incorporating your travel allowance into your basic salary.

If the answer to the question is ‘occasionally’, then you need to consider whether a travel allowance is for you. Most companies will still reimburse you for the travel you have done, but do not make the mistake that the travel allowance is a freebie over and above this.

Your reimbursement for business travel is added to your travel allowance on your tax return and, should your allowance be in excess of your actual business travel, as determined by a logbook, you may have an additional tax liability on assessment of your annual income tax return. It may be better to simply accept a travel reimbursement if you only travel occasionally for business purposes. If your answer is ‘yes’, you’re still not out of the woods. Your travel allowance should be a reflection of the actual business kilometres you travel, not a reflection of your job grade or salary. In order to determine an appropriate travel allowance, you need to estimate how many kilometres you expect to travel in the current tax year for business purposes. You then need to calculate a travel allowance based on these expected kilometres and the purchase price of your vehicle.

We suggest that you approach your HR Department for guidance in calculating an appropriate travel allowance or, alternatively, you can search for calculators on finance websites. Once you are satisfied that you have correctly calculated your travel allowance, you need to start recording your actual business travel in a logbook. There is a logbook available on the SARS website to assist you. Take note of the advice given by your employers and the media; don’t get caught unawares at the end of the tax year. You may find yourself owing money on your income tax assessment. The time to get this right is now.

Source:By Claire Barnes, Tax GES Advisory Consultant, Deloitte (Tax Professional)


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