PSIber Group (Pty) Ltd

Travel Allowance, Use of Motor Vehicle or Operating Lease may no longer be taxed at 100% in the payroll

From March 2019, only 80% or 20% of a travel allowance (IRP5 code 3701) or use of company car fringe benefit (IRP5 code 3802/3816) is included in remuneration for the purposes of PAYE, UIF, SDL, ETI and remuneration used to calculate the allowable tax deduction limit for contributions towards a retirement fund.

According to the definition of ‘remuneration’ as defined in paragraph 1 of the Fourth Schedule to the Income Tax Act, –

  • 80% of a travel allowance should be included in remuneration unless the employer is satisfied that at least 80% of the use of the motor vehicle for the year of assessment will be for business purposes, then only 20% of the travel allowance should be included in remuneration, and
  • 80% of the taxable benefit (cash equivalent value) of the use of a company car fringe benefit should be included in remuneration, unless the employer is satisfied that at least 80% of the use of the motor vehicle for the year of assessment will be for business purposes, then only 20% of the taxable benefit (cash equivalent value) of the use of a company car fringe benefit should be included in remuneration.

Therefore, the legislation only allows for 80% or 20% of the travel allowance or use of company car fringe benefit value to be included in remuneration.

PSIber makes provision to include 100% of the travel allowance or use of company car fringe benefit value in remuneration where employees only used the allowance/company car to travel for private purposes. However, in line with the current legislation and amendments made to the SARS PAYE BRS (Business Requirements Specifications V18.0.0), the 100% inclusion option must be amended to 80% or 20% based on the aforementioned criteria.

To change the setup navigate to:

Home > Human Capital Management > Payroll Management > Employee Pay Info

Change the % to 80 or 20 as shown below.

Please note that PSIber is set up to utilize 80 % as a default setting.

Any Allowances/ Fringe benefit Setup that makes use of IRP5 Code 3701, 3802 must be altered under the setup screens, located under :

Home > Company Setup & Maintenance > Payroll Setup > Income, Funds & Deductions

Where the employee requests that the entry should still be treated as 100 % taxable for fear of a shortfall during their personal assessment, we recommend loading an additional voluntary tax contribution.

Please note: to load the aforementioned the employee must submit the request in writing.

To load additional voluntary tax navigate to: 

 

Home > Human Capital Management > Payroll Management > Employee Pay Info

Calculate the difference in the tax between 100 % and 80% and load a Voluntary Overdeduct with the calculated value as illustrated below.

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