Hardly worth bothering with travel allowances

New legislation coming in on the first of March making travel allowances more bother than they are worth according to tax expert and chairman of payroll company nuQ Ron Warren.

According to Warren, the change will see the amount of a travel allowance that is taxable raised to 80% from the current level of 60%, while also doing away with deemed kilometers.

The allowance will only be given on those kilometers reflected in a properly kept log book.

“The combined effect of the two changes above is that the payment of a travel allowance will hardly be worthwhile,” he explained.

According to Neren Rau the CEO of SACCI, SARS communicated their intentions a fair while ago, thus there shouldn't be too much confusion for employers. The main thrust of the legislation is more important for employees.

According to Rau though in the long run they will become unsustainable, businesses are likely to continue them at the executive level: "While travel allowance tax benefits continue, even if they are reduced, business will continue to apply them"

"This new legislation is about closing a loophole, an administrative loophole. Sales forces will be affected however they've had time to adjust as they were aware of the imminent implementation of the legislation" he said. Those persons who travel long distances would probably already have started using log books as it would in all likelihood be more beneficial than the “deemed kilometre” method, depending on the distance travelled for business purposes compared with private travel.

SACCI has been strongly telling its members that they should keep their logbooks and should start doing that if they had not started. Companies who do not have these systems in place could use the function of keeping logbooks as a way of bringing sommeone in and creating employment or as a way of effectively using existing admin staff, thus it could go some way in reducing retrenchments in the current economy,