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Are reimbursive travel allowances subject to PAYE?

by , 10 June 2014
A reimbursive travel allowance is when your employee covers the costs of his travel, but reclaims the expense from the company. This allowance is better for employees who occasionally travel for business reasons.

But the big question is: Is a reimbursive travel allowance subject to Pay As You Earn (PAYE) just like a travel allowance?

Read on to find out the answer so you'll know exactly what to do if you give your employees a reimbursive travel allowance.

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Here's the answer if you want to find out whether or not reimbursive travel allowances are subject to PAYE

Reimbursive travel allowances aren't subject to PAYE.

What does this mean?

This means you must exclude this allowance when you calculate your employee's monthly PAYE deduction.

But, the Practical Tax Loose Leaf Service warns that due to the reimbursive travel allowance not being taxed during the year through PAYE, your employees can end up getting a huge shock on assessment if they've reported their business travel to you incorrectly.

To avoid this huge shock, the Loose Leaf Service says you must always make sure that, if you offer your employees a reimbursive travel allowance, you only do so if your employees give you accurate travel logbooks on a monthly basis.

If you don't insist on this, you could end up with SARS coming after your business for the underpaid PAYE!

Remember to use the following source codes to record a reimbursive travel allowance.

 

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There are two source codes you can use to record a reimbursive travel allowance

Use code 3702 if:

  • The rate per kilometre you used to reimburse the travel expenses is greater than the prescribed figures set by SARS; or
  • Your employee travelled more than 8 000 km for business during the tax year; or
  • You give your employee a travel allowance as well as a reimbursive travel allowance.

Use code 3703 if:

  • The rate per kilometre you used to reimburse the travel expenses is less than or equal to the prescribed figures set by SARS; or
  • Your employee travelled less than 8 000 km for business; or
  • You ONLY give the employee a reimbursive travel allowance (and no other travel allowances on top of it).

There you have it: Reimbursive travel allowances aren't subject to PAYE.

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