As South African taxpayers grapple with the implications of tax bracket creep in the 2025 budget, it's crucial to understand how certain allowances and benefits, such as travel allowances, company car fringe benefits, and reimbursive travel allowances can impact your tax liability. Due to the non-adjustment of tax brackets, many are unwittingly pushed into higher tax brackets, increasing their tax burden. However, strategic planning and awareness can help mitigate these effects.

Understanding Tax Bracket Creep

Tax bracket creep occurs when incomes rise due to inflation, but tax brackets remain unchanged. This can result in higher taxes even if your real income hasn’t increased. The 2025 budget’s lack of adjustment for these brackets means more taxpayers find themselves in this predicament, highlighting the importance of maximising deductions.

Travel Allowance: What You Need to Know

A travel allowance is granted to cover the costs of business travel. It's included in your taxable income, but you're entitled to claim deductions for business travel expenses. To maximise this deduction, maintain a detailed logbook of your business kilometres travelled. The South African Revenue Service (SARS) requires this documentation to substantiate your claim. Remember, only business-related travel expenses are deductible.

Company Car Fringe Benefit: Navigating the Tax Implications

The personal use of a company car is considered a taxable fringe benefit. The taxable value is determined by the original value of the vehicle and the distance travelled for private purposes. To reduce tax liability, keep a comprehensive logbook distinguishing between business and personal travel. The logbook can significantly reduce the taxable benefit amount as it provides evidence of business travel, which is not subject to fringe benefit tax.

Reimbursive Travel Allowances: An Overview

For employees receiving reimbursive travel allowances for business travel using their vehicle, tax implications vary. If the allowance per kilometre does not exceed the prescribed rate by SARS the allowance is not taxable as long as no other types of travel allowances or reimbursements are received. Amounts received in excess of the prescribed rate will be taxable.

Maximising Deductions Legally

1. Maintain Accurate Records: The cornerstone of maximising deductions is the maintenance of accurate and comprehensive records. This is particularly crucial for travel-related expenses and allowances.

2. Use of Logbooks: A logbook is indispensable for differentiating between personal and business travel. SARS provides a logbook template, which is a helpful tool for tracking your travel expenses accurately.

3. Understand Deductible Expenses: Familiarise yourself with which expenses are deductible under the travel allowance where you wish to claim actual expenses instead of the SARS actuarial table. Fuel, maintenance, and wear and tear are among the costs that can be claimed for business travel.

4. Seek Professional Advice: Tax laws are complex and constantly evolving. Consulting with a tax professional can provide personalised advice tailored to your specific circumstances, ensuring you claim all applicable deductions and reduce your tax liability legally.

Staying Within the Ambit of the Law

It’s imperative to approach tax deductions with integrity, ensuring all claims are legitimate and well-documented. SARS is vigilant in auditing claims that appear excessive or unsubstantiated. Adhering to the Income Tax Act and maintaining detailed records is not only about maximising deductions but also about contributing fairly to our nation's fiscal health.

By focusing on the specifics of travel allowances, company car fringe benefits, and reimbursive travel allowances, taxpayers can navigate the complexities of the 2025 budget to minimise their tax liability within the framework of the law. It’s a testament to the adage that a well-informed taxpayer is an empowered one.

Please note that the above is for information purposes only and does not constitute tax/financial advice. As everyone’s personal circumstances vary, we recommend they seek advice on the matter. While every effort is made to ensure accuracy, Nexia SAB&T does not accept responsibility for any inaccuracies or errors contained herein.

 

Article prepared by: Stefan Diederiks CA(SA)

Entrepreneurial Business Services Director, Registered Tax Practitioner

 

For any queries or further information, please contact:

• Hassen Kajie

Entrepreneurial Business Services Director

M: (+27) 82 333 3389 | E: hassen@nexia-sabt.co.za

• Yousuf Hassen

Entrepreneurial Business Services Director

M: (+27) 82 333 3376 | E: yhassen@nexia-sabt.co.za

Source: The South African Revenue Services

www.sars.gov.za