When employees are required to travel for business purposes, the employer must compensate/refund such employees for any legitimate and approved expenses incurred whilst traveling.
It is important to differentiate between private and business travel to determine the appropriate compensation method and ensure that including private travel does not inflate the amount refunded.
There are a number of ways in which an employer can compensate the employee for business travel. These typically include:
• A fixed Travel Allowance
• A direct reimbursement of Travel Expenses
• Provision of a Company Vehicle
• Payment of a Subsistence Allowance
These compensation methods are all taxed differently and are reported to SARS in their specific IRP5 codes on the employees’ tax certificate, and are verified and validated by SARS on assessment.
Employees also need to be aware of where travel allowances are paid and/or reimbursement claims, etc. are compensated for:
• Accurate records need to be kept for SARS audit purposes.
• Any business kilometers travelled must be logged by the employee using the SARS-provided log book (or similar),
• Where the employee has benefited from only paying PAYE on 20% of the travel allowance provided, SARS will reverse this and then tax the employee on 80% of the allowance, if the employee does not submit a supporting logbook when doing their annual return (i.e. the ITR12).