7. The Concept of ‘Private Travel’
The concept of ‘private travel’ lies at the heart of the rules that govern the taxation of travel compensation.
Under a variety of scenarios that arise in practice, both the employer and the employee must be able to differentiate correctly between private and business travel:
• The employer must check the travel claim from the employee and tax the compensation correctly, and
• The employee must record business kilometers correctly for reimbursement claims and for logbooks.
This puts the responsibility to understand the concept of private travel on both the employer and the employee.
Private Travel ‘Definitions’:
The concept of ‘private travel’ is not defined in the Income Tax Act but is referred to in section 8 (which deals with travel allowances and travel reimbursements), and again in paragraph 7 of the Seventh Schedule (that deals with company cars).
Section 8(1)(b)(i) states that an employee’s private travel is any travel: “… including travelling between his or her place of residence and his or her place of employment or business or any other travelling done for his private or domestic purposes …”.
The Seventh Schedule in paragraph 7(4) states that an employee’s private travel is any travel: “… including travelling between the employee’s place of residence and his or her place of employment or any other travelling done for his or her private or domestic purposes, …”.
Comments on the Private Travel ‘Definitions’:
The wording of the two ‘definitions’ differ, resulting in a potentially different meaning for private travel for travel allowances and travel reimbursements (section 8), compared to the meaning for the use of a company car (Seventh Schedule section 7(4)).
The “his or her” differences are not important, but the phrase ‘or business’ that was added to the legislation from the 2014 tax year, is only included in section 8 for travel allowances and travel reimbursements, is important.
Interpreted literally, it means that the travel from a ‘place of residence to a client’s business premise:
1. Is private travel for travel allowances and travel reimbursements
2. Is not private travel for a company car.
This would have resulted in serious problems if this was the correct interpretation.
Fortunately, SARS intervened and issued an interpretation that states that the “place of ‘business’ applies to office holders; and place of ‘employment’ applies to employees“.
The SARS interpretation makes practical sense. Nothing changes conceptually – it is only that private travel for public office holders is now defined as travel allowances and travel reimbursements.
Finally, what is important is that the substance of the two ’definitions’ (the wording that specifies that the travel “between the employee’s place of residence and his place of employment …” is private travel), is common to travel allowances, travel reimbursements, and company cars.
Change to ‘private travel’ for Judges
The amendment that provides that when judges travel from their place of residence to the various courts over which they preside in a state-owned vehicle, this travel is deemed to be business travel.
This amendment is interesting in two respects.
Firstly, as stated above the practice has for many years been that travel from an employee’s place of residence to a client (or a place of work or business), is treated as business travel. The court where the judge presides for the day is not his ‘usual’ place of employment but is the place where he deals with his ‘clients’ and is his place of work (or business). The amendment is therefore merely confirming that practice, and one wonders why the legislators have gone to the trouble to change the law in this respect.
Secondly, one wonders why the concession has been made for judges only and not for employees in general. To allow the new concession for judges only is patently unfair. There are many employees in all sectors of business who travel in principle under the same circumstances as do judges, and the concession should also apply to them.