Travel allowance expense claims are one of the most common triggers for a SARS audit. If you don't award, tax, and record your staff's travel allowances correctly, SARS will pick up these errors and audit you!
Something as simple as removing a travel allowance can trigger a SARS audit. So, one tiny mistake you could pay a 10% penalty for under-deducting PAYE.
You need to know when and how to award your staff with a travel allowance, to make sure your travel allowances will stand in a SARS audit.
Read on for the three common travel allowance errors - and how to fix them!
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1. Don't suddenly remove your travel allowances – SARS will notice the change
Let's say for the last five years, you've given everyone in the company a travel allowance. Including your secretary, who never travels for work.
But you realise SARS looks down at awarding travel allowances. So you suddenly stop awarding them to staff.
SARS will pick this up on your IRP5s and your PAYE returns! The sudden change shows the travel allowances you awarded in the past weren't justified. SARS will question you on this.
If you've just realised a staff member receives an allowance, but that they're not entitled to it. 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 over-tax. This way, you'll reduce the risk of SARS assessing your company, when it audits your employees.
Save R26 983 by keeping an accurate logbook
Maintaining an accurate logbook is a tedious affair but the benefit of additional tax savings may make it worthwhile.
An accurate logbook means you can base your claim for travel expenses for business and private use on the actual distances travelled.
You may also be able to reduce the taxable benefit of the company vehicle you use. No logbook puts you at the mercy of the provisions of the Income Tax Act, that can in some cases be extremely costly.
In fact, if you're using the gazette rates per kilometre method for calculating your travel claims, then no logbook means no claim!
Read on for more on how to save R26 983 by keeping an accurate logbook.
2. Don't use a travel allowance to limit the PAYE deduction for an employee
It's tempting to use a travel allowance to increase your employee's salary. But if SARS has any doubts about the allowance, it will check your employment contracts.
It will question why you gave the allowance, when it shouldn't have been. It could even issue a revised assessment, impose penalties and interest!
Make sure you state clearly in your employee's employment contract, that he needs to use his personal car to carry out his duties.
If his position in the company changes and requires him to travel on business, then you should amend his employment contract accordingly.
3. Don't use HR grading systems if they're not justified
This is where you categorise your staff according to their title in the company.
Someone who's junior will earn a certain salary bracket with certain company perks. And someone who's senior will earn a higher salary bracket and have other perks.
SARS will question this, especially if the employee never travels for business!
Avoid falsely implementing HR grading systems. But if you do have one, make sure whoever gets the travel allowance deserves it. And that the employment contract states travel will be an occasional job requirement.
Did you know that you can shrink the car's fringe benefit to 3.25% if you bought the car on a maintenance plan? Learn how on Your guide to taxing company cars and travel allowances