Here are the two types of travel allowance so you can correctly claim money back
Travel expense claims and deductions are one of the most common business tax deductions. But they're also the most common trigger for a SARS audit.
If you don't record your staff's travel allowances correctly, SARS will pick up the errors and audit you. And then it'll make you pay a 10% penalty for underdeducting PAYE.
Even worse, if SARS finds you guilty of tax evasion you'll face a 200% penalty!
Rather just claim the travel expense correctly the first time and avoid this mess. Read on to discover the two types of travel allowance you can claim.
Finally! The difference between a company car and a travel allowance explained
Here are the two types of travel allowance you can claim
The Practical Tax Loose Leaf
says there are only two types of travel allowances. If you claim a tax deduction on the wrong one, SARS will happily give you a penalty.
Before you decide which one you are, let's look at what they are:
1. Allowances or advances for business travel
This covers all the travel expense you had to pay on a business trip. For example, the costs of travelling to different factories or branches.
If you give your employees a travel allowance it's normally a fixed amount per month, and structured into his salary.
This allowance has nothing to do with the distance the employee travels. Once your employee uses up his travel allowance on travelling expenses, there's no additional money.
That's the first kind of travel allowance, but what's the second?
Legally pay less tax
The second type of Travel Allowance
2. Reimbursive travel allowance
You'll base this allowance on the actual distance your employee travels for business.
You'll pay the employee back the amount after he's already travelled.
If you give your employee a travel reimbursement travel allowance, you need to refund them for their travel. You'll do this at the end of each month based on business travel and distances they've recorded in their logbook.
There you go, the distinction is quite simple. Make sure you're claiming the right one or the 10% to 200% penalty could be coming your way.
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