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Consider these two things to ensure your employee's travel allowance doesn't land you in trouble with SARS

by , 10 June 2014
Dealing with travel allowances isn't simple. One mistake could trigger a full blown SARS audit.

If SARS finds wrong doing on your part, you'll end up paying harsh penalties.

Since that's a risk you can't afford to take, make sure you consider these two points when you grant your employee a travel allowance.

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Two considerations when it comes to travel allowance estimates

Consideration #1: Make sure your travel allowance isn't too small

If your travel allowance is too small, when your employee submits his ITR12 tax return, his business expense claims might be bigger than the allowance he gets, warns the Practical Tax Loose Leaf Service.

This simple act rings alarm bells for SARS. And it means your employee will lose out on deductible expenses.

If you think giving your employee a bigger allowance will solve this dilemma, you're wrong.

Consideration #2: The travel allowance mustn't be too big either

If the allowance you give him is too big, SARS will think you're giving your employee an extra perk. It could disallow the allowance altogether. Or your employee will end up having to fork over a lot of tax when SARS assesses him (as his business travel won't cover the untaxed portion of his travel allowance).

Check out this article. It provides an example of why you must ensure your employee's travel allowance is reasonable.

In addition to taking these points into account, we recommend you use this tip when it comes to travel allowances…
 

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If you don't know the answers to questions like:

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- If you're required to pay Vat on a company car your employee wants to buy?
- How to calculate travel allowances correctly to avoid being head hunted by SARS?
- If you can claim input tax on a vehicle you use for company purposes?
You're not only wasting unnecessary hours of time, but could also be making mistakes that SARS will hunt you down for.

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Use this tip to make sure your travel allowances stand up to a SARS audit

If you grant your employees a travel allowance, you must put a travel policy in place for your business. This policy must identify and address all aspects relevant to business travel.

Make sure you update your policy regularly if there are legislative amendments. This way, you'll be compliant and avoid unnecessary penalties.

There you have it. Making these two considerations will help you to avoid getting into trouble with SARS over travel allowances.



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