5. Legal Framework for Travel Compensation
The steps shown in the Tax 101 Comparison and their sequence reflect the Income Tax Act requirements.
5.1 Gross income and Section 8
Section 1 of the Income Tax Act defines all amounts that make up gross income, and paragraph (i) includes all fringe benefits including that of a company car into gross income, as follows – “(i) the cash equivalent, as determined under the provisions of the Seventh Schedule, of the value during the year of assessment of any benefit or advantage granted in respect of employment or to the holder of any office, being a taxable benefit as defined in the said Schedule, and ….
Then the definition of gross income in paragraph (c) of section 1 of the Income Tax Act includes any amounts paid in respect of services – “(c) any amount, including any voluntary award, received or accrued in respect of services rendered or to be rendered or any amount (other than an amount referred to in section 8(1)) received or accrued in respect of or by virtue of any employment or the holding of any office …”
Note that because the three ‘special’ allowances are defined to be ‘taxable income’ in section 8(1), they are excluded from the definition of ‘gross income’ (otherwise they would be included twice in taxable income).
Section 8(1) specifies that the portion of the travel allowance and the travel reimbursement that is not business travel (i.e. the private travel portion) is taxable income.
Section 8(1)(a)(i) specifies as follows – There shall be included in the taxable income of any person (hereinafter referred to as the “recipient”) for any year of assessment any amount which has been paid or granted during that year by his or her principal as an allowance or advance, excluding any portion of any allowance or advance to the extent that the allowance or advance or a portion of the allowance or advance is exempt from normal tax under section 10 (1) or has actually been expended by that recipient— (aa) on travelling on business, as contemplated in paragraph (b), unless an allowance or advance has been granted by an employer in respect of the use of a motor vehicle as contemplated in paragraph 7 of the Seventh Schedule;
In respect of travel allowances, the above exclusion of business travel expenses in section 8(1)(a) allows the employee to claim the value of his business travel in terms of paragraph 8(1)(b) in order to reduce the value of the travel allowance or travel reimbursement that is included into taxable income.
This reduction is done on assessment if the employee declares his business kilometers travelled during the year in the logbook area of his ITR12 annual return form.
5.2 Section 23(m)
Section 23(m) was added to the Income Tax Act with effect from 1 March 2002. There is a misunderstanding that the deductions that are no longer allowed by section 23(m) include deductions for business travel expense claims.
Firstly, section 23(m) specifies that the only category of taxpayers that are allowed to claim business expenses on assessment other than the allowable deductions listed in section 23(m) are – “…agents or representatives who earn mainly [more than 50%] of their remuneration in the form of commission based on sales or turnover attributable to him…”

Section 23(m) also allows labour law independent contractors that are deemed to be employees by the Fourth Schedule to claim business expenditure related to their services income.
Secondly, section 8(1)(a)(i) of the Income Tax Act includes all allowances into taxable income after first allowing business expenses to be deducted from the special allowances (travel, subsistence, and public office).
Section 8(1)(a)(i) does not allow business expenses to be deducted from general allowances before they are included in taxable income, therefore their full (gross) value is included.
Taxable income is the balance of income after deductions have been made – no further deductions can be claimed from amounts that are classified as taxable income. Therefore, no business-related expenses can be claimed against general allowances that are reported on the tax certificate. For example, if a tool allowance is paid and reported on the tax certificate as a code 3713 general allowance, then no tool expenses can be claimed on assessment.
Agents or representatives who earn more than 50% of their remuneration in the form of commission based on sales or turnover attributable to them, as well as labour law independent contractors who are deemed to be Fourth Schedule employees, are still allowed to claim expenses from general allowances.
Employers are advised to stop paying general allowances and to rather reimburse the employee for these business expenses.
Remember that all general allowances are remuneration, whereas reimbursements are not.
Changing from allowances to reimbursements will reduce total remuneration thereby lowering the cost of the 1% skills levy and the 1% employer-paid UIF contribution.
To confirm – all employees who are paid or granted business travel compensation are allowed to claim business travel expenses from their travel income on assessment by virtue of the section 8 provisions discussed above.
Section 8(1)(b)(ii) provides for travel allowances and specifies as follows – (ii) subject to the provisions of subparagraph (iii), where such allowance or advance has been paid to the recipient in order that it may be utilized for defraying expenditure in respect of any motor vehicle used by the recipient, the portion of the allowance expended by the recipient during the year of assessment for business purposes shall, unless an acceptable calculation based on accurate data is furnished by the recipient, be deemed to be an amount calculated by applying the rate per kilometre determined in the manner prescribed by the Minister of Finance by notice in the Gazette for the category of vehicle used, on a distance travelled during the said year for business purposes (other than private travelling as contemplated in subparagraph (i)) : Provided that where an allowance or advance is deemed to have accrued under section 7B to the recipient in the year of assessment during which that allowance or advance is paid, the distance travelled for business purposes in respect of which that allowance or advance is received shall be deemed to have been travelled during the year in which that allowance or advance is paid;
Section 8(1)(b)(iii) provides for travel reimbursements and specifies as follows – (iii) where such allowance or advance is based on the actual distance travelled by the recipient in using a motor vehicle on business (excluding the said private travelling), or such actual distance is proved to the satisfaction of the Commissioner to have been travelled by the recipient, the amount expended by the recipient on such business travelling shall, unless the contrary appears, be deemed to be an amount determined on such actual distance at the rate per kilometre fixed by the Minister of Finance by notice in the Gazette for the category of vehicle used : Provided that where an allowance or advance is deemed to have accrued under section 7B to the recipient in the year of assessment during which that allowance or advance is paid, the distance travelled for business purposes in respect of which that allowance or advance is received shall be deemed to have been travelled during the year in which that allowance or advance is paid;
5.3 Fourth Schedule Remuneration
Travel compensation is paid or granted to the employee on a weekly, fortnightly, or monthly frequency during the tax year, and the rules that must be followed to estimate the remuneration value of the private travel are provided in the definition of remuneration in the Fourth Schedule.
The Fourth Schedule definition of remuneration, limited here to only the sub paragraphs that are relevant for travel compensation, are specified below.
“remuneration” means any amount of income which is paid or is payable to any person by way of any salary, leave pay, wage, overtime pay, bonus, gratuity, commission, fee, emolument, pension, superannuation allowance, retiring allowance or stipend, whether in cash or otherwise and whether or not in respect of services rendered, including— (b) any amount required to be included in such person’s gross income under paragraph (i) of that definition, excluding an amount described in paragraph 7 of the Seventh Schedule; (bA) any allowance or advance, which must be included in the taxable income of that person in terms of section 8(1)(a)(i), other than — (i) an allowance in respect of which paragraph … (cA) applies; (cA) 80 per cent of the amount of any allowance or advance in respect of transport expenses referred to in section 8(1)(b), other than any such allowance or advance contemplated in section 8(1)(b)(iii) that is based on the actual distance travelled by the recipient: Provided that where the employer is satisfied that at least 80 per cent of the use of the motor vehicle for a year of assessment will be for business purposes, then only 20 per cent of the amount of such allowance or advance must be included; (cB) 80 per cent of the amount of the taxable benefit as determined in terms of paragraph 7 of the Seventh Schedule: Provided that where the employer is satisfied that at least 80 per cent of the use of the motor vehicle for a year of assessment will be for business purposes, then only 20 per cent of such amount must be included; (cC) 100 per cent of so much of the amount paid or granted as an allowance or advance referred to in section 8 (1) (b) (iii) as exceeds the amount determined by applying the rate per kilometre for the simplified method in the notice fixing the rate per kilometre under section 8 (1) (b) (ii) and (iii) to the actual distance travelled;
Subparagraph (cC) was added to the definition of remuneration with effect from 1 March 2018.