2. Travel Reimbursement Principles
The correct term for this special type of reimbursement is a “reimbursive travel allowance”, but to keep it short and sweet, the term “travel reimbursement” is used in this workbook. This is also sometimes referred to as Kilometer Reimbursement, Reimbursive travel or Km Reimbursement.
The name “reimbursive travel allowance” underlines the dual nature of this method of business travel compensation – it has an aspect of an allowance, but it is more closely aligned to a reimbursement – so I feel comfortable referring to it as a ‘travel reimbursement’.
It has the nature of a reimbursement because it is paid after being claimed by the employee as and when he travels for business purposes and incurs the employer’s business travel expense.
It is not paid regularly as is generally the case with allowances.
However, it is not a ‘true’ reimbursement because the exact value of the expense is not reimbursed.
The value to be reimbursed is estimated (or ‘deemed’) according to the requirements of section 8(1)(b)(iii) of the Income Tax Act (see the Legal Framework in the next section). Because it does not have an exact value, it moves the reimbursement somewhat towards being classified as an allowance, which is an amount that is “… based on the expected business-related expenditure.”
Reimbursements resulting from expenses incurred by an employee on behalf of an employer are always business related, and the same applies to travel reimbursements.
The employee claims the business kilometers that he travelled, the reimbursement is generally not taxable or if a portion of it is taxable then business travel expenses can be deducted on assessment if a logbook is submitted to SARS.
It is important to understand the difference between a reimbursement of an employee’s business travel expenses (the subject of this Chapter), and a reimbursement of an employee’s private travel expenses.
A reimbursement of private travel expenses is not provided for in the legislation.
However, some employers choose to financially assist an employee with private travel expenses, but this assistance would be fully taxable with no deduction possible, reported as either additional salary (code 3601) or preferably a taxable general allowance (code 3713).