Understanding Subsistence Allowances and Advances

Managing employee expenses is a crucial aspect of running a business, and understanding subsistence allowances and advances can help streamline this process. Here’s a summary of key points from the SARS guidelines on subsistence allowances and advances.

What are Subsistence Allowances and Advances?

Subsistence allowances and advances are payments made by an employer to an employee for expenses incurred while traveling for business purposes. These payments cover daily expenses such as meals, accommodation, and incidental costs.

Key Points from SARS Guidelines

Daily Allowances: Employers can provide a daily allowance to employees traveling for business to cover meals and incidental costs. This allowance is a predetermined amount that simplifies expense management and reporting.

• Accommodation

When an employee is required to stay overnight for business purposes, the cost of accommodation can be covered either through direct payment by the employer or through a subsistence allowance. If the allowance exceeds the actual cost of accommodation, the excess must be included in the employee’s taxable income.

• Incidental Costs

These are minor expenses incurred during travel, such as tips, parking fees, and small personal expenses. Employers can provide a fixed daily allowance to cover these costs.

• Advance Payments

Employers may also provide advance payments to cover expected travel expenses. These advances are settled upon the employee’s return, with any excess being repaid to the employer or additional expenses being reimbursed to the employee.

• Tax Implications

Subsistence allowances and advances are generally not taxable if they fall within the prescribed limits set by SARS. However, any excess amounts paid over these limits must be included in the employee’s taxable income and reported accordingly.

Prescribed Limits for Subsistence Allowances

SARS sets specific limits on the amount that can be paid as a subsistence allowance without incurring tax. These limits are periodically updated and are essential for employers to follow to ensure compliance. For the latest prescribed limits, employers should refer to the SARS guidelines.

Documentation and Compliance

Employers must maintain accurate records of all subsistence allowances and advances paid to employees. This includes details of the business trip, amounts paid, and any receipts or documentation supporting the expenses. Proper documentation helps ensure compliance with SARS regulations and facilitates smooth financial auditing.

Why Understanding Subsistence Allowances Matters

Properly managing subsistence allowances and advances ensures that employees are adequately compensated for business travel expenses while maintaining compliance with tax regulations. It also simplifies the expense reporting process and helps avoid potential tax liabilities for both the employer and the employee.

If you need further assistance or have specific queries, don’t hesitate to contact PRNC. By staying informed, employers can effectively manage travel expenses and ensure compliance with tax regulations.