What is a travel allowance?
A travel allowance is an amount a South African employer pays an employee towards the cost of using their own vehicle for work, usually a set amount each pay period. It is part of remuneration, so PAYE applies, and the employee settles the final tax on assessment, based on their actual business travel.
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Schedule a strategy callThe 80/20 rule
The employer includes 80% of a fixed travel allowance in remuneration when calculating PAYE. If the employer is satisfied that at least 80% of the vehicle’s use in the tax year will be for business, only 20% is included. The employer checks this monthly, and goes back to 80% from the month circumstances change. The full allowance goes on the IRP5 under code 3701.
Reimbursive travel
A reimbursive allowance pays for actual business kilometres. From 1 March 2026, the prescribed rate is R4.95 per kilometre. Up to that rate, the payment is not subject to PAYE, although it must still appear on the IRP5: under code 3703 if no other travel compensation is paid, or code 3702 if it is. Anything above the rate is taxable. For example, an employee paid R5.95 per kilometre for 1,000 kilometres has R4,950 free of PAYE and R1,000 taxed, reported under code 3722.
Claiming on assessment
On their tax return, the employee can claim a deduction for business travel against the allowance, supported by a logbook. Actual costs can be claimed, or costs from the SARS table, which uses a fixed cost by vehicle value plus fuel and maintenance per kilometre. For the 2027 tax year, the table runs up to a vehicle value of R920,000, with a top fixed cost of R237,679 a year. Fuel and maintenance can only be claimed if the employee bore the full cost.
Travel allowances when TopSource runs your payroll
When TopSource runs your payroll in South Africa, we apply the 80% or 20% inclusion each month, tax any reimbursement above the prescribed rate and report each amount on the IRP5 under the right code.
Frequently asked questions
How much of a travel allowance is taxed through PAYE?
80%, or 20% if the employer is satisfied that at least 80% of the vehicle’s use in the tax year will be for business.
What is the SARS rate per kilometre in 2026?
R4.95 per kilometre from 1 March 2026. Reimbursements up to that rate are not subject to PAYE.
Does an employee need a logbook for a travel allowance?
Yes, to claim a deduction for business travel on assessment, because the distance travelled for business must be proven.
Related terms in South Africa
- Temporary Employment Services (South Africa)
- Section 198B Fixed-Term Rule (South Africa)
- BCEA Earnings Threshold (South Africa)
- Retrenchment (South Africa)
- Restraint of Trade (South Africa)
- Family Responsibility Leave (South Africa)
- Sick Leave Cycle (South Africa)
- Employment Equity Act Reporting (South Africa)
- B-BBEE Scorecard (South Africa)
- Critical Skills Work Visa (South Africa)
- POPIA and Employee Data (South Africa)
- EMP201 Monthly Return (South Africa)
- EMP501 Reconciliation (South Africa)
- IRP5 and IT3(a) Certificates (South Africa)
- Tax Directive (South Africa)
- Fringe Benefits Tax (South Africa)
- Retirement Fund Two-Pot System (South Africa)
- Employment Tax Incentive (South Africa)
- Medical Scheme Fees Tax Credit (South Africa)