Some employees receive a travel allowance where they are allowed to claim the actual kilometres travelled on behalf of the employer. This is a reimbursive travel allowance.
With a “normal” travel allowance, 80% of the amount is included in the employee’s monthly income for tax purposes. In other words, 20% of the allowance is received (temporarily) tax free until the income tax return is submitted and the taxpayer is able to meet all the requirements. In a previous newsletter I wrote about the taxpayer’s burden of proof, the duty to keep a logbook and exactly what information SARS requires to be reflected in the logbook.
The reimbursive travel allowance, on the other hand, is completely tax free if it meets the requirements regarding the rate of reimbursement. No one knows when SARS will tighten the belt on the requirements and taxation of the reimbursive travel allowance.
There is good news if you are not good with keeping a logbook and you only receive a reimbursive allowance:
Previously, the reimbursive allowance was capped at 12 000 kilometres per tax year, and the tax-free amount was R3,55 per kilometre. As from the 2019 tax year, the kilometres are no longer capped, and the rate has increased to R3,61.
So, if your reimbursive travel allowance pays you R3,61 per kilometre or less, the full amount of your allowance is tax free! If your rate per kilometre is higher (let’s say you receive R3,70) the balance of R0,09 is taxable. In this case, you only need the logbook for your employer.
A caveat: When it comes to the annual tax return, if you receive both types of travel allowances, BOTH amounts are taxed. This often result in dire consequences for the taxpayer who receives a nasty tax bill surprise.
Employers must make sure that they use the correct IRP5 code for these allowances.
Petro van Deventer