Q: Employee in Oudtshoorn: 

I use my own transport in the execution of my professional duties. My employer only pays a fixed travel rate of R3.05 a kilometre, without considering any additional expenses such as maintenance (wear and tear), insurance, and value of my vehicle. The value of my car is R80,000-R100,000. 

How can I calculate a better, proper travel allowance inclusive of the additional expenses mentioned above? — Via e-mail

A: Rob Cooper, tax expert at Sage, responds: 

I am pleased that your employer is making use of a travel reimbursement to compensate you for your personal costs of using your own car for business purposes. Many employers make use of a travel allowance, and this is a more complex matter and more likely to result in difficulties than a travel reimbursement.

There are two ways in which to arrive at a rate per kilometre that takes into account the cost of ownership (including depreciation) and running costs such as insurance, licensing, fuel and maintenance.

The first way is to make use of the cost-scale table that is published by the SA Revenue Service (Sars) on its website.  By applying the purchase value of your vehicle (including VAT) and the estimated total (personal plus business) kilometres you expect to travel in a year to the table, this will give you a “Sars cost scale” rate per kilometre that will be about in line with the value of your car and its running costs.

The second, and simpler, way is to use the Sars “prescribed” rate per kilometre, which for the 2019/2020 tax year is R3.61.  This is a rate Sars calculates and adjusts for inflation from year to year based on motor industry statistics. It represents an average rate for all vehicles that perhaps favours less expensive vehicles and is not so favourable for more expensive vehicles.

There are many advantages to you and your employer to use the Sars prescribed rate per kilometre, but there are too many to include in this response.

Irrespective of the rate per kilometre used to calculate the travel reimbursement, you must always keep a logbook that records the basic details of every business trip in case this is required to prove your business travel expense claim in your ITR12 annual tax return at the end of the year.

Compensating you for your business travel kilometres is an expense for your employer. Your employer therefore has the right to set a rate per kilometre that it can afford, but hopefully your employer is fair-minded, and takes your personal travel expenses into account.