Travel allowance vs reimbursive travel

Two ways an employer can pay an employee for using their own car for business — they look similar but they're taxed completely differently. Here's how to pick the right one and stay on the right side of SARS.

The short version

If your employee uses their own vehicle for company business, you can either pay them a travel allowance (a fixed monthly figure, partly taxed up front) or pay reimbursive travel (a per-kilometre rate against an actual logbook). Reimbursive at the SARS rate, capped at 12,000 km a year, is the simplest option and incurs zero PAYE if you stay within the limits. Travel allowance is heavier admin but suits employees who do a lot of variable travel.

The travel allowance

This is the older, more familiar mechanism. The employer pays a fixed monthly amount — say R6,000 — and treats it as a travel allowance on the payslip (IRP5 code 3701). The employee uses it however they like; the cost of the vehicle, fuel, maintenance, and insurance is on them.

For PAYE purposes, the 80/20 rule applies. By default, 80% of the allowance is treated as remuneration and PAYE is withheld on it; only 20% is treated as business and excluded from PAYE up front. If the employee genuinely spends more than 80% of their working time on business travel, the employer can flip the ratio — only 20% included for PAYE, 80% excluded — but they have to be ready to defend that assessment.

At year-end, the employee submits an ITR12 with a logbook. SARS recalculates the deductible portion based on actual business kilometres and either refunds the excess PAYE or charges the shortfall. Without a logbook, the full allowance is taxed as ordinary income.

Reimbursive travel

This is what most modern small businesses use. The employee submits a logbook each month and the employer pays them a per-kilometre rate (IRP5 code 3702 or 3703) for the business kilometres claimed.

Where it gets simple: up to 12,000 business kilometres per tax year, paid at or below the SARS prescribed rate of R4.84/km (for 2026/27), the entire payment is tax-free. No PAYE, no inclusion in remuneration, no end-of-year reconciliation. It goes on the IRP5 as code 3703 (non-taxable) and that's the end of the story.

Above 12,000 km in a year, or paid above R4.84/km, the excess is reported under code 3702 (taxable reimbursive). At that point the 80/20 framework kicks in and the employee can claim against the logbook on assessment.

The decision: which one to use

Reimbursive travel is the better default for small employers:

Travel allowance still suits very heavy travel (regional sales reps doing 30,000+ km a year), where the fixed allowance smooths income and the employee is sophisticated enough to manage logbook-based deductions on their ITR12.

What about a company car?

A separate animal entirely. If the employer owns the car and the employee uses it for both business and private, the value of the private use is a fringe benefit taxed monthly at 3.5% (or 3.25% if a maintenance plan is included) of the determined value. See our company-car fringe benefit guide for the full mechanics.

Logbook discipline

Both mechanisms require a logbook to make a claim against. SARS-compliant means:

Spreadsheet, paper book, or app — SARS doesn't mind, as long as it's contemporaneous (recorded at the time, not reconstructed later). One missed month is normally tolerated; sustained gaps trigger an assessment query.

Practical takeaway

For a small business hiring a salesperson or service technician who'll do under ~12,000 km a year, set up reimbursive travel at R4.84/km and require a monthly logbook. It's tax-free for the employee, no PAYE recalculation for you, and the audit trail is the logbook itself. Use a travel allowance only when you have an employee whose travel is heavy enough that the fixed allowance is genuinely smoothing real costs.