Travel Allowances - Leaving money on the table
An analysis of the SARS 10-Year Tax Statistics
The number of taxpayers receiving a Travel Allowance (code 3701) have slowly decreased (37%) to 386 741 in the 2016/17 tax year compared to the 2010/11 tax year when the applicable tax laws changed. In contrast the number of taxpayers utilizing the Reimbursed Travel Allowance- Taxable (code 3702) increased by 15% to 187 222 in the same period.
Both the above allowance groups reduce their taxable income using a logbook to substantiate the business portion of their travel. The number of taxpayers keeping a logbook (code 4014) have also decreased by 29% to 350 923 from 2010/11 to 2016/17.
The administrative burden of keeping a logbook could be a reason for these declines as many taxpayers may have decided that the time spent on manual logbooks compared to the benefit is not worth it. In our view we estimate that around 80-90% of the taxpayers claiming the deduction on code 4014 is still writing manual logbooks without the assistance of electronic devices.
The applicable SARS codes for travel allowances are:
- 3701 Travel Allowance
- 3702 Reimbursive travel allowance – taxable
- 4014 Travel expenses – fixed cost – business cost claimed against allowance
SARS Logbook Requirements
The minimum required logbook information:
- Date of travel
- Kilometers travelled
- Business travel details (where to and reason for the trip)
- Opening and Closing Odometer
Taxpayers have the option to record their travel manually and complete the sample logbook format from SARS
Each year an adjusted claim table is published to take into account the effect of inflation. The 2017/18 tax year table as example :
SARS 10 Year Statistics
Travel Allowance and Reimbursed Travel Allowance-Taxable are reported separately by SARS. Travel Allowance is 26% of the Total Allowances in 2016/17 showing a decrease from the 45% level in 2010/11. Many taxpayers moved from 3701 to 3702 over the last 6 years and the introduction of new regulations from 1 March 2018 should continue this trend.
The ratio of the amount claimed between 3701 and 3702 in the 2016/17 tax year is 85:15. A normal review of these statistics may have a margin of error and our take on these number applying a weighting formula gives a better comparison (see below).
Analytics 10 Year Statistics
The number of taxpayers not using a logbook have decreased over the past few years but an estimated 129 000 still do not keep adequate records. Given the average business deduction of R58 657 in 2016/17 , this would equate to a R7.5 billion unclaimed deduction.
Interesting to note is the average Travel Allowance of R70 862 per annum compared to the average for the Reimbursed Travel Allowance of R24 734. On average taxpayers claim 71% business travel which will result in a refund in most cases (where 80% is taxed during the year).