Employees can structure their salary packages to get tax-efficient benefits and at the same time ensure that they are not out of pocket when they use their assets or own time for their employer's business.
I have received a lot of correspondence asking for more details of these benefits. Today I will discuss travel allowances.
If you get a travel allowance, there is no prescribed maximum level for it. It should, however, be reasonable in the circumstances. You would not expect someone in a normal salaried position to receive a travel allowance in excess of his or her salary.
If, on the other hand, you are employed as a salesman on the basis that your employer will cover travelling costs in the form of a travel allowance, but the balance of any remuneration will be paid as commission as a percentage of any sales achieved, in a lean month you may receive a travel allowance but little other remuneration.
Generally, the allowance should be based on the costs that it is anticipated you will incur in owning and running your car. Because the South African Revenue Services has found that, on average, 50 percent of the allowance will not be claimable as business travel with effect from April 1 this year, 50 percent of the allowance is being subjected to employees' tax. (This was previously 40 percent.)
In addition to the travel allowance, your employer may also pay separately for your petrol and/or maintenance. These amounts should appear on your payslip as part of the allowance. Fifty percent of these amounts will also be subjected to tax.
When you submit your income tax form, you need to include the calculation setting out the amount of the travel allowance that can be treated as business travel costs. Even if your normal salary is only subject to SITE, you must register as a taxpayer and submit a tax form if you receive a travel allowance that is reflected on your IRP5.
It is possible for your employer to pay for the business travel you make in your own vehicle by paying you a specific amount a kilometre, based on specified distances travelled. This is known as a reimbursive allowance. Provided that this payment is paid at a rate of not more than R1,30 a km for not more than 8 000km during any one tax year, it need not be reflected on your IRP5.
If, however, you receive this allowance and a general allowance, both must be reflected on your IRP5, although the reimbursive allowance is not required to have been subjected to employees' tax.
When you complete the section on the tax form setting out your claim for the travel allowance, if you have not maintained a log book and details of your actual costs spent, you will need to refer to the deemed costs. When referring to the table (included in the information booklet sent with your tax form) you need to use the original cost of your vehicle including VAT, but excluding finance charges.
If you acquired the car under a finance lease, it is the cash value as reflected on the agreement (again including VAT). If you did not acquire the vehicle under a third party agreement, the market value at the time of acquisition must be used.
You need to provide your opening and closing odometer readings for the year and will be deemed to have travelled 14 000km privately. You may only claim the excess up to a maximum of 32 000km for the year.
If you are not able to substantiate any amount of business travel, you will be taxed on the balance of the allowance you have received that has not yet been subjected to employees' tax.
If your total travel is less than 14 000km, I would recommend you maintain a log book, or go the reimbursive route, although, depending on the value of your car, the R1,30 may not properly compensate you since it is below the AA rates for some car categories.