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Two travel allowance errors your company MUST avoid

by , 31 May 2013
There are inherent risks when you offer travel allowances to your employees. If your business doesn't award tax and record employee travel allowances correctly, SARS will pick up on these errors. Your company will face an audit, not to mention penalties you'll be forced to pay for noncompliance. Read on to find out what you can do avoid these employee travel allowance errors.

A travel allowance is an allowance you give your employee to cover his business travel costs. These can include driving to and from client meetings.

The last thing you want is to trigger a SARS audit for your company by being non compliant by mismanaging employee travel allowances. This carries a heavy penalty for non-compliance when SARS audits your company.

But your company can avoid this.

Avoid these two travel allowance errors to escape penalties and audits

Error #1:Don't use a travel allowance to limit the PAYE deduction for an employee

While it may be tempting to use a travel allowance to increase the salary payout to an employee, don't do it. SARS will check your employment contracts if it has any doubts about the allowance. And it'll question the legality of an allowance that's been awarded when it shouldn't have been. This will result in a revised assessment being issued and imposed penalties with interest.

Solution: 'Make sure it states clearly in the employee's letter of appointment or employment contract that he's required to use his personal car to carry out his duties,' advises The Practical Tax Loose Leaf Service.

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Error #2:Don't use HR grading systems if they're not justified

An HR grading system is one in which you categorise your staff according to their seniority in the company. This means an employee in the most junior category will earn a certain salary bracket and will have certain company perks. On the other hand, an employee in the most senior category will earn a higher salary bracket and have certain other perks.

In some cases, 'this is based on a percentage of total cost to company. And employees will get a travel allowance regardless that this isn't a requirement of their job,' says the Loose Leaf. SARS will question this, especially if your employee never needs to travel for business.

Solution: Avoid falsely implementing HR grading systems. If your company has one, ensure employees who get the travel allowance deserve it and that their employment contracts state that traveling will be a job requirement from time to time.

There you have it! Steering clear of these employee travel allowances errors will ensure you avoid hefty penalties by SARS for noncompliance.



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