Why travel allowance tax confuses so many payslips
If you get a fixed monthly travelling allowance from your employer, you've probably noticed your payslip doesn't tax the full amount. It also isn't tax free. That gap between "fully taxed" and "tax free" is exactly what trips people up. A travel allowance sits in a strange middle zone. SARS treats part of it as taxable income every month through PAYE, then reassesses the whole thing properly once a year when you submit your tax return. This guide walks through both halves of that process, and how they fit together.
Part 1: The monthly PAYE withholding rule (the 80/20 rule)
Each month, your employer doesn't tax your entire travel allowance. Instead, SARS's rules say they must add either 80% or 20% of the allowance to your taxable income before calculating PAYE:
- 80% inclusion (the default): applies unless your employer has specifically assessed and is satisfied otherwise.
- 20% inclusion: applies only if your employer is satisfied that at least 80% of your vehicle's use during the tax year will be for business purposes. A sales rep who's on the road constantly is a typical example.
This is a withholding estimate, nothing more. It exists so that SARS collects roughly the right amount of tax throughout the year instead of a large, unpredictable bill at assessment. You can see exactly how this plays out in rand terms using our travel allowance tax calculator, which runs your salary and allowance through the current SARS brackets for you.
Part 2: The annual reconciliation (where your real deduction lives)
The monthly PAYE deduction is never the final word. When you file your ITR12, you claim a separate travel allowance deduction based on your actual business use for the year, and SARS reconciles that against what was already withheld via PAYE. This is where a logbook becomes essential. Without one, SARS can disallow the deduction entirely, no matter how much genuine business travel you did.
Keeping a compliant logbook
A logbook that will hold up to a SARS review needs, at minimum:
- Your vehicle's odometer reading on 1 March (start of tax year) and 28/29 February (end of tax year)
- The date of every business trip
- The destination and business purpose of each trip
- The kilometres travelled for that trip
From these entries, SARS calculates two figures for the year: your total business kilometres and your total kilometres travelled (business plus private kilometres, including your daily commute, which always counts as private, not business, travel). Dividing business kilometres by total kilometres gives your business-use percentage. This single number is what your whole deduction hinges on.
Deemed cost vs actual cost: choosing your deduction method
Once you know your business-use percentage, you apply it to one of two cost bases:
- Deemed cost: SARS publishes an annual table of fixed, maintenance and fuel cost values per kilometre, banded by the value of your vehicle. This is the simpler route. You don't need to keep every fuel and service receipt, just the logbook and your vehicle's value.
- Actual cost: if you've kept full records of what the vehicle actually cost you to run (fuel, maintenance, insurance, licence fees and wear and tear) you can deduct your business-use percentage of those real costs instead. This can produce a larger deduction for an expensive or high-mileage vehicle, but requires far more detailed record-keeping.
Whichever method you use, the current rates and bands are published by SARS directly and updated periodically; because they change, this guide intentionally doesn't quote fixed rand figures here. Check the latest SARS travel allowance tables, or a registered tax practitioner, for the current year's exact values, and see our own tax tables page for the PAYE brackets that apply to the taxable portion.
Fixed travel allowance vs reimbursive travel allowance
These two are commonly confused because both relate to using your own vehicle for work, but they're taxed completely differently:
| Fixed travel allowance | Reimbursive travel allowance | |
|---|---|---|
| How it's paid | A set rand amount every month | A rate per business kilometre actually driven |
| PAYE treatment | 80% or 20% taxed monthly upfront | Generally tax free up to the SARS prescribed rate per kilometre |
| Requires a logbook? | Yes, to claim a deduction at year-end | Yes, to support the business kilometres reimbursed |
| Typical IRP5 source code | 3701 | 3702 |
Some employees receive both on the same IRP5, a base fixed allowance plus reimbursement for kilometres above a certain threshold. Check your payslip and IRP5 codes if you're unsure which applies to you.
Worked walkthrough
Picture an employee who drove 28,000 km in the tax year, of which their logbook shows 19,600 km were for business. That's a 70% business-use percentage. If SARS's deemed cost for their vehicle's value band works out to a certain rand-per-kilometre figure, they'd multiply that rate by 19,600 km to get their deduction, then subtract that deduction from the full travel allowance shown on their IRP5 to find their actual taxable travel allowance for the year. If that figure is lower than the 80%-of-allowance amount their employer already taxed monthly, the difference reduces their assessed tax and can produce a refund. If it's higher, they may owe SARS the shortfall. This is exactly why the monthly PAYE deduction and the annual outcome can look quite different. It is also why a good logbook pays for itself.
Frequently asked questions
How to calculate travel allowance tax in South Africa?
Your employer adds 80% (or 20%, if approved) of your monthly travel allowance to your income before working out PAYE. At tax return time, SARS recalculates the real taxable amount using your logbook's business-kilometre percentage applied to either the deemed cost table or your actual vehicle costs.
How much of my travel allowance is taxable?
Monthly, 80% or 20% of the allowance is taxed via PAYE as a withholding estimate. The portion that's genuinely taxable once you file is whatever's left after subtracting your logbook-based business travel deduction from the full allowance.
How to calculate travel allowance deduction?
Divide your business kilometres by your total kilometres for the tax year to get a business-use percentage. Apply that percentage to either the SARS deemed cost per kilometre for your vehicle's value band, or your actual documented running costs, to arrive at your deductible amount.
How does a travel allowance tax deduction with a logbook work?
A compliant logbook records the date, destination, purpose and kilometres of every business trip, plus your vehicle's odometer reading at the start and end of the tax year. SARS uses this to calculate your business-use percentage and validate your claimed deduction on assessment.
How does travel allowance affect PAYE?
It raises the income used to calculate monthly PAYE, but only on the taxable portion (80% or 20%) of the allowance, not the full amount. This shows up as extra tax withheld on your payslip and is reconciled again when you submit your ITR12.
Related reading
- Travel Allowance Tax Calculator: see your monthly PAYE impact in rand terms.
- How PAYE Works: understand the bracket system behind every calculation on this site.
- Tax Rebates Explained: how age-related rebates reduce your annual tax.
- Full Tax Tables: the SARS brackets, rebates and thresholds used across this site.
- Provisional Tax Calculator: relevant if you also earn freelance or business income.