Travel allowances are incredibly useful for your employees and for you. It enables them to go on their business trips worry free and get some money back in the form of a tax deduction.
But they're a nightmare for companies and if you make a mistake, you wont' just get a slap on the wrist from SARS, you could end up paying even more...
Read on to ensure you avoid making these three common mistakes.
14 Practical examples make your travel calculations in minutes
Spending time trying to calculate all the variables of company cars vs. travel allowances can be frustrating not to mention complicated.
Three mistakes you must avoid doing when claiming a travel allowance
1. Don't use a travel allowance to limit the PAYE deduction for an employee
You mustn't use a travel allowance to increase your employee's salary. SARS checks your employment contracts if it's suspicious. If it catches you out, you'll be end up paying SARS that added penalty.
Solution: Make sure it states clearly in the employee's letter of appointment or the employment contract that he's required to use his personal car to carry out his duties.
If business travel is a job requirement, make sure it says so in the employment contract that he's required to use his personal car to carry out his duties.
2. Don't use HR grading systems if they're not necessary
If you give a senior employee a travel allowance, even if he doesn't actually travels on business, SARS will question this.
Solution: Don't falsely implementing HR grading systems. If you do have one, make sure whoever gets the travel allowance not only deserves it but also his employment contract states clearly that travel will be a job requirement from time to time.
There's one more mistake you need to watch out for.
Avoid costly tax issues
The last mistake you need to watch out for when claiming a travel allowance
3. SARS will notice if you suddenly remove travel allowances
If you've given everyone in the company a travel allowance, including employees who never travels for work and suddenly stop giving them to employees, SARS will notice.
SARS sees this as admitting your previous travel allowances weren't justifiable.
Solution: If you've just realised a staff member is getting an allowance, but shouldn't be, don't just increase the employees' basic salary by the value of the previous travel allowance.
Record the allowances as fully taxable, but you must get the employee's consent to voluntarily over-tax.
This way, you'll reduce the risk of SARS assessing your company, when it audits your employees.
If you can avoid these three mistakes, you'll be able to claim a business tax deduction of your travel allowance.