By: Robin Galloway, Tax Manager at Mazars Port Elizabeth
The 2019 filing season for the submission personal income tax returns through eFiling will commence on 1 July 2019. In preparation for the filing of the income tax return, it is recommended that those taxpayers who receive a travel allowance make sure that their 2019 logbook meets all of the requirements laid out by the South African Revenue Service (SARS).
This is according to Robin Galloway, Tax Manager at Mazars Port Elizabeth, who says that there have been numerous cases of SARS rejecting travel claims in the past, due to insufficient information having been supplied. “For this reason, taxpayers will have to ensure that they know what is expected when they submit their travel claims for the 1 March 2018 to 28 February 2019 period.”
Galloway explains that there are essentially two types of travel allowances that employers can offer their employees. “The first type includes allowances or advances with regards to general business-related transport expenses, while the second type covers allowances or advances to be used for expenses in relation to a vehicle used by the taxpayer for business purposes.”
He adds that employers are required to withhold Pay-As-You-Earn (PAYE) from the travel allowance provided to the employee who uses their own vehicle for business purposes. “The PAYE is calculated on 80% of any travel allowance paid to an employee each month. Where employers are satisfied that at least 80% of total mileage to be travelled by the employee in the tax year will be for business purposes, PAYE may be calculated based on 20% of the travel allowance paid. Any amount of a travel allowance that a taxpayer does not actually expend for business purposes (including travel between an employee’s residence and their place of employment) will form part of their taxable income on assessment.”
To claim a deduction against a travel allowance, a taxpayer is required to put forward a claim for business travel costs when submitting their income tax return, says Galloway, who notes that there are two ways for taxpayers to determine their business travel costs.
“One can either use the actual figures and expenses incurred, or the actual kilometres travelled for business can be calculated by applying the deemed cost per kilometre method which uses a table that takes the value of the vehicle into account.”
In either case, Galloway says it is crucial to keep an accurate logbook, recording all business travel undertaken during the year of assessment. He also warns that it is commonplace for SARS to disallow logbooks that do not meet SARS’ minimum criteria.
“Accordingly, it is important that taxpayers ensure that their logbooks contain the following information: the date of each business trip; the opening and closing odometer reading per business trip; total kilometres travelled per business trip (i.e. the difference between the opening and closing odometer reading); the destination travelled to and from per business trip; the reason for the business trip; and details of any actual business expenses per business trip (i.e. fuel, oil, repairs and maintenance).” In this regard, SARS provides a comprehensive E-Log book on its website:
Galloway adds that, because only 80% of a travel allowance is subject to PAYE, if a taxpayer does not submit a travel claim to SARS for business travel, 20% of the travel allowance is effectively viewed as unspent. “The unspent portion of the travel allowance received will be taxable on assessment, and the amount that you pay in each year, in this case, would be the tax on the 20% of the allowance that had not been taxed during the year.”
If the taxpayer finds keeping an accurate logbook too cumbersome, they could elect to receive a reimbursive travel allowance paid by their employer per business kilometre travelled at the prescribed rate (currently capped at R3.61 per kilometre). No logbook is required in this case and no PAYE is payable on the reimbursee travel allowance, provided that the rate paid by the employer does not exceed R3.61 per business kilometre travelled. A reimbursive travel allowance is not available to a taxpayer who received another form of travel allowance or reimbursement (except for toll fees or parking) during the year of assessment.
“It is therefore important that taxpayers receiving travel allowances make it a priority to ensure that their logbooks are accurate and contain all the information required by SARS in order to prevent any business expenditure claimed against the travel allowance on assessment being disputed by SARS” Galloway concludes.