Author: Ian Hurst — Managing Director, Paymaster Business Solutions

How to tax a travel allowance Travel Allowance

Is my travel allowance being taxed correctly is a question we are asked over and over.

Here is everything you need to know about travel allowances. (How much to tax, how much to reimburse, when not to tax and what codes to use). Read more…

Definition: Where an allowance or advance is based on the actual distance travelled for business purposes (that is excluding private use), the amount expended on business is deemed to be the actual distance travelled, multiplied by the prescribed rate per kilometre fixed by the Minister of Finance.

Prescribed rate per kilometer 2023

R 4.64 per kilometre; OR
• the determined rate (refer to the rate per kilometre schedule).

Leased vehicle

Where an employee, his / her spouse or child owns or leases a motor vehicle (whether directly or indirectly by virtue of an interest in a company, trust or otherwise) and such vehicle is left to the employer or associated institution in relation to the employer, the sum of the rental paid by the employer together with any expenditure in respect of the vehicle which was borne by the employer, is deemed to be a travel allowance. This deemed travel allowance must be declared as such and the employee will be entitled to claim expenses incurred for business travel as a deduction on assessment.

Note: The rental received by the employee must not be declared as rental income but as a travel allowance. Although the employee obtains the right of use of the vehicle from his / her employer, he/she is not subject to tax on the benefit arising from the private use of such motor vehicle.

Combination of travel and reimbursive allowance

Where a travel allowance is paid in addition to a reimbursive allowance or vice versa, both amounts will be combined on assessment. This combined allowance will be treated as a travel allowance.

The table hereunder shows in which circumstances a travel allowance is subject to employees’ tax and the relevant code under which it must be reflected on the IRP 5 certificate.

Scenario Must PAYE be deducted? Code
A fixed allowance is paid Yes 3701
Fuel and expenses paid by the employer (e.g. petrol, garage and maintenance cards). Yes 3701
Reimbursed at not more than the prescribed rate per kilometre and travels not more than 8 000 kilometres. No other travel allowance is received. No 3703
Reimbursed at not more than the prescribed rate per kilometre and travels not more than 8 000 kilometres. Receives a travel allowance or certain expenses are paid for by the employer. No (reimbursement)

Yes (fixed allowance)

3702/3701
Reimbursed at not more than the prescribed rate per kilometre and travels more than 8 000 kilometres. No other travel allowance is received No 3702
Reimbursed at not more than the prescribed rate per kilometre and travels more than 8 000 kilometres. Receives a travel allowance or certain expenses are paid for by the employer. NoYes (fixed allowance) 3702/3701
Reimbursed at a rate exceeding the prescribed rate per kilometre. No 3702

80% of the travel allowance paid to an employee is subject to the deduction of employees’ tax. Where the employer is satisfied that at least 80% of the use of the motor vehicle for a year of assessment will be for business purposes, then only 20% of the allowance is subject to the deduction of employees tax with effect from the 1 March.

An allowance or advance which is based on the actual distance travelled for business purposes (reimbursive travel), is not subject to employees’ tax but the unexpended portion may be subject to normal tax when the employee’s income tax assessment is finalised.

IRP5/IT3(a) detail

The total travel allowance (100%) must be reflected on the IRP 5 certificate under code 3701.

The employees’ tax deducted in respect of the travel allowance must be reflected as PAYE, even where the rest of the employee’s remuneration is only subject to SITE.

An allowance or advance which is based on the actual distance travelled for business purposes (reimbursive travel), is not subject to employees’ tax but the full amount must be reflected on the IRP 5:

  • under code 3703 where the reimbursive allowance does not exceed 8 000 kilometres AND the prescribed rate per kilometre AND no other compensation is paid to the employee.
  • under code 3702 where the reimbursive allowance exceeds 8 000 kilometres OR the prescribed rate per kilometre OR any other compensation is paid to the employee

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