How are travel expenses for which I was reimbursed treated for PAYE purposes?
WHAT IS A TRAVEL ALLOWANCE
A travel allowance is any allowance paid or advance given to an employee in respect of travelling expenses for business purposes.
The following two situations are envisaged with regards to travel allowance, namely:
a travel allowance given to an employee to finance transport (for example, a set rate or amount per pay period); and
a reimbursement given to an employee based on actual travel.
Any allowance or advance in respect of travelling expenses not to have been expended on business travelling is deemed to has been spent on private travelling (this includes travelling between the employee’s place of residence and his / her place of employment).
FIXED TRAVEL ALLOWANCE
A fixed travel allowance can be seen as an allowance which is given as a fixed amount to an employee in respect of travelling expenses for business purposes.
These amounts are normally paid as part of the employees remuneration package (weekly, fortnightly, monthly, etc.)
REIMBURSIVE TRAVEL ALLOWANCE
A reimbursive travel allowance can be seen as an allowance or advance which is based on the actual distance travelled for business purposes (excluding private use). These amounts are normally paid by an employer to an employee by multiplying the actual business kilometres travelled by a rate per kilometre.
EMPLOYEES' TAX TREATMENT
Fixed travel allowance: Only a 80% portion of the fixed travel allowance is subject to the deduction of employees' tax. This employees' tax deduction will only represent PAYE.
Reimbursive travel allowance: The reimbursive allowance might be a taxable or non-taxable allowance.
A non-taxable reimbursive allowance is an reimbursive amount which is deemed in terms of the Act to be expended on business travelling if such reimbursive amount: Does not exceed the rate per kilometre as fixed by the Minister of Finance; and The total business kilometres reimbursed for during the tax year does not exceed 8000 kilometres; and
No other form of compensation has been given/paid to the emloyee (such as a fixed travel allowance).
The reimbursive travel allowance that is deemed to be expended on business travelling (comply with all three criteria mentioned above), will be seen as an non-taxable reimbursive travel allowance and no employees' tax will be deductible from such reimbursement.
The reimbursive travel allowance which DOES NOT comply with all three criteria mentioned above, will be seen as a taxable reimbursive travel allowance BUT no employees' tax will be deductible from such reimbursement.
This amount will be taxed with the processing of the income tax assessment.
Where a fixed travel allowance is paid in addition to a reimbursive allowance or vice versa, both amounts will be combined on assessment.
INCOME TAX ASSESSMENT TREATMENT
The full (100%) fixed travel allowance as well as the taxable reimbursive travel allowance will be added together on assessment.
The taxpayer will be allowed to claim actual business travel expenses against the allowance (according to the prescribed rules and limits) and the portion exceeding the claim will be taxable on assessment.
The fixed travel allowance and/or reimbursive travel allowance must be reported as follows:
code 3701 - full amount (100%) of the fixed travel allowance;
code 3702 - taxable reimbursive travel allowance;
code 3703 - non-taxable reimbursive travel allowance.