Changes to reimbursive travel expenses from 1 March 2018
27 Mar 2018
Employers may elect to reimburse employees for the travel costs at a set rate per kilometre, as opposed to a fixed monthly travel allowance.
Any allowance or advance in respect of travel expenses not to have been expended on business travelling will be subject to taxation to the extent that it has been spent on private travelling.
Up to 28 February 2018, where an employee receives a reimbursement based on the actual business kilometres travelled with no other compensation being paid to the employee in terms of travel allowances, and the cost is calculated in accordance with the prescribed rate per kilometre, no PAYE is deductible, provided the business travel does not exceed 12 000 kilometres per year. No PAYE is withheld and the amount is not subject to taxation on assessment. This amount is disclosed under code 3703 on the IRP5.
Where any of the following are applicable:
- If the business kilometres travelled exceed 12 000 (2017: 8 000) kilometres per year; or
- if the reimbursed rate per kilometre exceeds the prescribed rate; or
- if other compensation is paid to the employee
The allowance becomes taxable and disclosed separately under code 3702 on the IRP5 certificate.
As from 1 March 2018, where the reimbursed rate exceeds the prescribed rate, irrespective of the business kilometres travelled, there is an inclusion in remuneration for PAYE purposes. The full inclusion amount is subject to PAYE, unlike the fixed travel allowance where only 80% of the amount is subject to PAYE.
For example, if an employee is reimbursed for 17 891 business kilometres travelled at 420 cents per kilometre and the prescribed rate is 361 cents per kilometre, the amount that will be included in remuneration for purposes of calculating the PAYE is calculated as (420 cents – 361 cents) x 17 891. Based on this calculation an amount of R10 556 will be included in remuneration when PAYE is calculated.
PAYE will therefore be withheld, on a payment basis, on the amount exceeding the prescribed rate of 361 cents per kilometre, irrespective of the total amount of business kilometres travelled.