1. Income Tax Calculation of Travel Compensation
Focusing on travel income only, Rob Cooper’s understanding of the principle of the SARS calculation of income tax at the end of the tax year for travel allowances and travel reimbursements, is as follows:
1. Using the ITR12 annual return facilities, the employee declares the vehicle’s determined value, the vehicle’s opening and closing kilometers for the year (the difference is total km travelled), plus his daily business travel km as recorded in his logbook.
2. SARS calculates the Cost Scale rate/km from the information declared in the ITR12.
3. SARS calculates the business travel expense deduction by multiplying the business kilometers from the logbook by the Cost Scale rate/km.
4. SARS calculates the total income for travel from the tax certificate as follows:
• For travel allowances: Equals the Code 3701 amount
• For travel reimbursements: Adding together the code 3701, 3702 and 3722 amounts.
5. SARS calculates taxable travel income by deducting the business travel expense from the total travel income but limits the value of the business travel deduction to the total travel income amount.
6. SARS calculates income tax from the taxable income amount.
The above is no doubt a simplistic view of the principles that underlie the SARS travel income tax calculation, but hopefully, it is reasonably accurate, at least in principle.
It does indicate that for travel allowances and travel reimbursements, the most important factor in aligning the PAYE and Income tax calculations is the rate/km that is used by both calculations.
This suggests that a rate/km greater than the Cost Scale rate/km should not be used in the payroll – it will backfire on the employee when SARS raise an assessment at the end of the year.
Because of the advantages of simpler administration and fairness to all employees, serious consideration should be given to standardising using the Prescribed ratedkm in the payroll to prevent remuneration from being calculated.
Other factors that can result in there being differences between the PAYE and the Income-tax calculated on travel amounts are:
1. The ‘80%/20%’ estimate in the payroll of the value of the business travel deduction for travel allowances versus the final calculation by SARS on assessment of the business travel deduction using the actual business travel kilometers from the logbook (multiplied by the Cost Scale rate/km).
2. The employee’s kilometers (business and private) for the year are estimated in the payroll when forecasting the value of the travel allowance amount for the year ahead, whereas at the end of the tax year the actual kilometers travelled from the logbook are used for the income tax calculation.

The inevitable difference in the number of kilometers will result in a difference between the remuneration and the income value that is calculated SARS For assessment.