Last week I discussed some of the details relating to travel allowances. This week I will deal with subsistence allowances and reimbursement of relocation expenses.
Subsistence allowance:
Your employer pays you a subsistence allowance because you haveto be away from home overnight. Tax law says that, if the allowance does not exceed certain limits, it need not be subjected to employees' tax nor reflected on your IRP5.
This is because the South African Revenue Service (SARS) considers the allowance was spent on subsistence. This sometimes applies even if your employer pays for all the costs of the trip ie travel costs, accommodation, and food.
SARS considers that you may have other costs which will not be covered by your employer. For example, you may have to put your dogs in kennels, or you may incur small costs on the trip that you forget to pick up the receipt for.
If your allowance is within the limits it will not be subjected to tax.
The limits are:
* If you travel within South Africa or to Botswana, Swaziland, Lesotho or Namibia, and your employer does not have to pay for your accommodation, you may be paid up to R150 a day without incurring any tax obligations; and
* If your employer pays for your accommodation, you may be paid up to R65 a day without any tax implications.
There is no limit to the number of days that you are required to be away at any one time for these tax-free allowances to apply.
If you have to travel overseas your employer may pay you up to US$120 a day, even if your accommodation costs are also paid. However, it does not apply if you spend more than six weeks outside South Africa at any one time. In this situation you may request SARS to approve a suitable amount.
If the allowance exceeds any of these amounts it should be reflected on your IRP5. You will be taxed on the amount unless you can prove that you have incurred expenditure to the extent of the allowance. You have to do this when you submit your tax return.
Reimbursement of relocation expenditure:
If your employer requires you to move to another town, city or country, the moving costs will be tax free to the extent that they cover:
* The costs of transporting you, your family and your possessions to the new place of employment and residence;
* Reasonable costs related to the sale of your previous home and settling into your new home. This would include, for example, buying new curtains, new school uniforms for the children, and so on. It does not include any loss made on the sale of your previous home; and
* The cost of hiring accommodation for up to 183 days while you find permanent accommodation.
In practice SARS allows your employer to give you up to one month's salary to cover such costs instead of your employer paying the specific expenses.
I recommend you check with a tax advisor before you accept that something is or is not tax free, or you may have a rude awakening when SARS takes a look.