Do you receive a travel allowance from your employer because your job used to entail significant travel? As the Covid-19 pandemic hit and lockdown restrictions have curbed travel, you might be wondering how this will affect your taxes. Here’s what you need to know to avoid owing the taxman, even more, this tax season.
Under normal circumstances, your employer would only offer you a travel allowance if your job requires you to spend a large chunk of your time travelling. For instance, if you are a salesperson and spend most of your working day visiting potential clients. In this case, it would be the assumption that you would predominantly be moving around from place to place quite often. The rule of thumb is that 80% of your car allowance would be subject to monthly PAYE (Pay-As-You-Earn), corroborated by the assumption that you use your car to travel for personal use 80% of the time while spending 20% of your time travelling for work purposes. You can read our blog for further clarification on the tax effects of your salary structure here.
At the end of the tax year, you would need to submit a detailed record of your mileage by means of a logbook to SARS who would calculate your travel deduction and most likely conduct a travel audit. This detailed logbook is imperative, as you would need to provide SARS with proof of your travel expenses for both personal and professional use.
If you don’t include an accurate logbook, SARS have been known to assume that all of your travel is for personal reasons (and that your business mileage is nil) and you will end up owing tax when you file your return.
Having difficulty keeping your logbook up-to-date? We have created a nifty, easy-to-use Vehicle Logbook app to record your work travel.
Pre-Covid, assuming you travelled more than 20% for work (or less than 80% for personal) you would have ended up paying too much tax on your travel allowance during the year, and would therefore be entitled to a tax refund (happy days!).
If you spend less than 20% of your time travelling for work, then your employer should simply reimburse you the flat rate of R3.82 per km (as of 1 March 2021). Remember that travelling to and from work does not qualify as work travel.
If you are not an essential worker, then you probably travelled far less than expected during the 2021 tax year. While you may be saving on travel costs, if you received a travel allowance, unfortunately you will have a nasty tax bill to settle when you file your 2021 return. This is because you will have paid tax on only 80% of your travel allowance during the year (with the assumption being you travelled 20% for business) so you will have to foot the bill for the remaining tax when you submit your return.
You should review your travel allowance amount with your employer. It might be worth reducing it or removing it completely if you will be travelling less than 20% for work for the foreseeable future. Alternatively, you can request that your employer withholds additional PAYE each month during these uncertain times. to ensure that you won’t have to pay in a substantial amount on assessment.
Just in case you may need help calculating your travel deduction, we have created a Travel Deduction Tax Calculator for 2021, for you to easily compare actual costs and deemed costs for the maximum tax deduction this tax season!