- When an employee travels for business purposes, the employer ordinarily compensates the employee for any travel related expenses incurred by that employee.
- It is important to differentiate between private and business travel to determine the appropriate compensation method to be used, and the resulting tax implications, if any.
- There are a number of ways in which the employer can compensate the employee for these travel-related expenses, the most common methods include:
- A travel allowance – i.e. a fixed monthly amount.
- A direct reimbursement method – i.e. a repayment based on receipts, etc.
- Provision of a company vehicle.
- A subsistence allowance / payment – i.e. based on a SARS prescribed rate.
- These methods are all taxed differently and are reported to SARS in their own unique codes on the IRP5.
- Employees also need to be aware that where travel allowances and reimbursement claims are compensated for, all relevant details need to be kept regarding business kilometers travelled via a log book.