Two types of travel allowances you need to know about
43984, 27 Aug. 2014
Travel allowances are one of the most common triggers for a SARS audit.
Often, employers fail to award and record their employee’s travel allowances correctly. When this happens, SARS picks up the errors and audits you. And this means only one thing: Harsh penalties.
In fact, you might have to pay a 10% penalty for under deducting Pay As You Earn (PAYE) and SARS could find you guilty of tax evasion.
Luckily, there’s a way to stop this from happening to you.
It all starts with understanding the two types of travel allowances. Knowing the different types will bring you a step closer to awarding these allowances correctly and getting the tax treatment right too.
What’s a travel allowance?
A travel allowance is the sum of money you give to your employee regularly, such as every month, to cover his business travel costs, for example, driving to and from client meetings.
Now let’s look at the two types of travel allowances…
Every employer needs to know about these two types of travel allowances
#1: Allowances or advances for business travel
This allowance covers all of the expenses your employee incurs while travelling on business. For example, the costs your employee incurs when travelling to different factories or branches.
You’ll give your employees a travel allowance if it’s a fixed amount per month and it’s structured into his salary.
#2: Reimbursive travel allowance
You’ll base this allowance on the actual distance your employee travels for business purposes and you’ll pay it after your employee has done the travelling.
You’ll give your employee a reimbursive travel allowance if you refund him for his travel at the end of each month based on business travel per his logbook.
There you have it: Knowing the two types of travel allowances will bring you a step closer to awarding them correctly and getting the tax treatment right.
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