1. Purpose of Business Travel Compensation
The purpose of business travel compensation to compensate an employee who travels for business purposes and who has incurred the employer’s business travel expenses.
The purpose of business travel compensation IS NOT to:
• Assist the employee to purchase a motor vehicle. If the employer does assist, this would simply be additional salary, and fully taxable.
• Assist an employee with his private travel expenses.
Employers sometimes assist their employees with private travel expenses such as bus fares, taxi fares, etc. to enable the employee to get from home to work and back again. This assistance is not ‘travel compensation’, but it is interesting to note that while one would expect that assistance by the employer would be taxable, there are three methods available to assist employees with their private travel expenses – two are taxable, and one is not taxable.
These 3 methods available to assist employees with their private travel expenses are:
• The use of a company-owned or rented motor vehicle: This is a taxable benefit. This would be a ‘company car’. Because the use is solely for private travel, it would be taxed as normal as a company car but with no allowable deductions for business travel expenses.
• Transport allowance: This is a taxable allowance. The employer pays a cash amount for bus fares, taxi fares, etc. This ‘transport’ allowance is paid in respect of private travel and is simply an additional salary under another name.
• Transport service: This is a non-taxable benefit. The employer provides a service that takes employees in general from home to work and back again. In other words, the employer owns or rents a vehicle and employs a driver who takes the employees home after work and picks them up again in the morning from home for work as part of his duties.