Tax season inevitably means digging out all those airline boarding passes, fuel slips and receipts from your travels over the past year. As a frequent business traveller, you've likely accumulated quite the collection in hopes of a decent refund on allowable expenses.
However, the taxman wants more than a shoebox stuffed with crumpled receipts. Unless you're a tax expert, you may be unsure what expenses the South African Revenue Service (SARS) considers legitimate deductions. And trying to write off an extravagant stay at the Saxon Hotel or a lavish meal at Greenhouse would probably raise some red flags.
"While business travel allows for some indulgences, it's no excuse to go overboard," Bonnie Smith, GM of Corporate Traveller, notes. "Understanding what SARS deems reasonable expenses allows you to plan work trips without stressing over compliance."
There's no need to subsist solely on airport pies and garage coffee when on the road for business. By getting familiar with SARS' criteria, you can navigate tax season smoothly.
Which deductions are legitimate?
Smith explains that travel expenses are considered a type of business expense, and business-related expenses can be legitimately claimed. However, there are specific conditions and limits for claiming travel expenses from SARS.
You can only claim travel expenses from SARS if you receive a subsistence allowance from your employer, which covers meals, parking, and other costs, or if you earn commission and more than 50% of your total remuneration comes from that commission. The allowable expenses vary based on your position and the nature of your travel.
If you're a high-level executive like Thabo from the C-suite, you may be able to claim expenses for business-class flights and five-star hotels. However, if you're an employee like Sipho from accounts, the maximum allowable amount for meals and incidental costs per night within South Africa is R548. Different limits apply for foreign travel.
Smith says, "No record keeping is required for spending up to this amount." This means that if you spend within the allowable limit, you don't need to itemise your meal expenses. You can choose how to allocate the funds, such as paying for dry cleaning or tips, but your meal allowance may only cover some of your costs, especially if you indulge in expensive items like single malt whiskies. Any additional expenses beyond the allowance must be paid out of pocket.
"You can only claim basic travel expenses, and SARS will scrutinise the time, place, and purpose of your travel to ensure you're not on the road for personal reasons, such as testing mattresses at upscale B&Bs unless that's actually your job," notes Smith.
Document your travel expenses
Documenting your expenses will increase the chances of a successful tax claim, according to Smith. Keep physical receipts that clearly show the date, amounts spent, and itemised details of the purchases.
"Using your personal vehicle for business is different from using a company car. You'll need to record your car's odometer reading on March 1st (the start of the new tax year) and maintain an accurate logbook detailing your business and personal trips throughout the year," she explains.
"You can claim expenses related to fuel costs for business trips, but not for commuting between home and your office, as those are not considered direct business expenses. However, if you work in an office but occasionally visit clients 50km away, those trips could be deductible expenses – it's best to consult a tax expert."
Although keeping meticulous records is time-consuming, it will simplify the process and can significantly reduce your taxable income.
Maintain all necessary documentation and file or digitise what you can if SARS decides to conduct a tax audit. A shoebox full of crumpled receipts won't soften the tax man’s heart.
Tips for successful claims
Smith recommends these tips for submitting travel and expense claims to SARS:
- Find out your expense budget and reconcile actual amounts with your budget after eating out, taking petrol, etc.
- Ensure your expenses are directly related to your business activity – you can't travel to a conference via Makro to buy an air fryer.
- Keep meticulous records of your expenses, including receipts, a logbook, and/or a spreadsheet. Include the date and time of purchases, which clients you visited, and why you made those visits.
- Keep a record of basic expenses for your subsistence claim—where you had your meals, whether the company paid for them in full or in part, and who accompanied you (if you were treating a client to lunch, for example).
- Before you submit your expenses, understand what is deductible and what isn't so that you do not attract penalties.
- Take care when claiming VAT on entertainment expenses. Entertainment is one area in which SARS does not allow VAT deductions, although companies can claim VAT back on, among other things, business travel and employee subsistence, domestic airfares, parking, toll fees, and internet costs.
Frequently asked questions
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What are travel cost expenses?
If you are wondering 'what can I claim back from SARS?' you will need to understand this. Business travel expenses are costs incurred while travelling for work-related purposes. These typically include transportation (such as airfare and fuel for business trips), lodging, meals, parking, and other incidental expenses. According to SARS, travel cost expenses consist of:
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A travel allowance is given to an employee to cover transportation (e.g., a set rate or amount per pay period).
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Reimbursement is provided to an employee based on actual travel expenses incurred when they have travelled for business purposes.
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Which business travel expenses can you claim back from SARS?
Fortunately there are tax deductible business expenses in South Africa. You can reclaim basic travel expenses, which depend on your role and the nature of your travel. Regular employees can claim meals and incidental costs up to R548 per night within South Africa. High-level executives might claim business-class flight expenses and five-star hotel stays. Fuel costs for business trips (excluding daily commuting) are also reclaimable. It's essential to keep detailed records, including vehicle usage logbooks outlining the business purpose, date, and distance of each trip, along with all related receipts and invoices for a travel claim.
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How much travel allowance is tax deductible?
For meals and incidental expenses within South Africa, regular employees' maximum deductible amount is R548 per night. Different limits apply to international travel, with potentially higher amounts for high-level executives.
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When should a travel allowance be included/declared in a tax return?
Travel expenses can be claimed if you receive a subsistence allowance from your employer or if more than 50% of your total earnings come from commissions.
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Is the travel allowance included in taxable income?
Reimbursed travel allowances are not subject to PAYE but may be taxable upon assessment when the returns are submitted to SARS.
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Is the travel allowance fully taxable?
For fixed travel allowances, expense reimbursements, and company petrol cards, typically 80% is subject to PAYE and included in the employee’s remuneration. This assumes that only 20% of the vehicle’s use is for business purposes. If the employer is sure that at least 80% of the vehicle's use is for business, then only 20% of the allowance or reimbursement is included for PAYE purposes. This must be assessed monthly. Note that this only applies to fixed allowances, expense reimbursements, and company petrol cards, not per-kilometre reimbursements, which are not taxed during the year and may remain non-taxable after year-end if certain conditions are met. Final tax assessments are made when the employee files their tax return.
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What is a subsistence allowance?
An employer provides a subsistence allowance to cover meals, parking, and other incidental expenses during business travel.
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What is the difference between a subsistence allowance and a subsistence advance?
Employers can cover travel expenses in two main ways:
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A subsistence allowance SARS: A fixed amount given for the trip, usually without needing proof of expenses, although some employers may require receipts.
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A subsistence advance SARS: A fixed amount is provided for the trip, with a requirement to submit proof of expenses and repay any unused funds.
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What are deemed subsistence allowances?
A SARS subsistence allowance sets deemed meal rates and incidental costs for domestic travel per night spent away from home. They also establish fixed daily amounts for international business travel, which vary by country. The SARS travel rate is updated annually on the SARS website.
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How does SARS tax travel allowances?
Travel allowances are taxed under paragraph (cA) of the definition of "remuneration" in the Fourth Schedule of the Income Tax Act, with two rates for PAYE: 80% or 20%. The standard withholding rate is 80% unless the employer is certain that at least 80% of the vehicle's use is for business purposes; then the rate is 20%. Since the 2019 SARS BRS Change – Patch Phase 3, the 100% withholding rate is no longer applicable. Travel allowances aim to offset business travel costs, and allowances not used for business travel do not qualify as travel allowances under section 8(1)(a)(i)(aa) of the Income Tax Act.