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One travel allowance mistake that triggers a SARS audit

by , 06 March 2014
Have you decided that a travel allowance is the way to go for your business? Be careful! If you make this one mistake it will trigger a SARS audit.

Here's why...


How to pay R23 963.20 less tax on your travel allowance
The obvious first step is to keep an accurate logbook.
But what SARS doesn't want you to know is how you can save R23 963.20 just by doing so.

The most common travel allowance mistake exposed
If you don't award, tax and record your staff's travel allowances correctly, SARS will pick up the errors and audit you.
SARS will probably find you guilty of tax evasion – and that carries a 200% penalty!
Let's see how this works in practice. 
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 that SARS takes a dim view of 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 on your part is an admission that the travel allowances you awarded in the past weren't justifiable. SARS will question the previous salary structures you had in place.
Here's what you can do to avoid this mistake...
How to avoid this one common travel allowance mistake
If you've just realised a staff member is receiving an allowance, but 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 voluntarily over-tax. This way, you'll reduce the risk of SARS assessing your company when it audits your employees.
Make changes to the employee's contract of employment, if needs be.
This is just one of the most common mistakes companies make when it comes to travel allowances. For the other two, plus how to treat the different types of travel allowances turn to chapter T09: How to tax travel allowances in your Practical Tax Loose Leaf. If you aren't subscribed yet, simply order your copy here. 
Until next time

Natalie Cousens
Managing Editor: Practical Tax Loose Leaf Service
P.S. If you have a travel allowance question, visit www.accountingandtaxclub.co.za and one of our experts will answer it.

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