SARS changes could put the brakes on travelling

The South African Revenue Service (SARS) has made changes directly related to travel allowances that could result in taxpayers putting the brakes on travelling.

"Previously, taxpayers were using the travel allowance to their advantage, but SARS is ready to clamp the tyres on offenders misusing travel allowances," says PricewaterhouseCoopers tax consultant Sadiyya Mosam.

Previously, taxpayers were entitled to the granting of two travel allowance benefits.

Pay As You Earn (PAYE) was withheld from 60 percent of the travel allowance, giving the taxpayer additional cash flow for eight extra months before having to pay SARS the money, if the money became due at all.

Mosam said that from March 1, SARS would change this percentage.

"Now 80 percent of the allowance will become subject to PAYE," she said.

"This will significantly reduce a taxpayer's monthly cash flow."

The second benefit of the existing travel allowance structure was the considered business kilometre ruling.

In terms of this rule, taxpayers had to limit their mileage travelled to 32, 000 kilometres a year.

"The first 18, 000 is deemed to be for private travel, while the remainder 14, 000 kilometres is then allocated to business travel," Mosam said.

This enabled office-based staff whose private travel exceeded the 18, 000 kilometres to obtain a maximum tax benefit from their travel allowance.

They were allowed to claim a fictitious deduction, thus using and possibly even abusing the travel allowance as a tax structuring tool.

Mosam said that from March 1, SARS would repeal the deemed business kilometre ruling making it compulsory for all taxpayers who wished to claim a travel allowance to keep log books.

"With these new developments soon to be implemented, employees should reconsider their respective travel allowances and determine if the allowance will still benefit them.

"If the outcome is negative, employees should change their salary packages to avoid potentially damaging issues the amendments might cause," she said.