Nov 4, 2021 | Articles, Tax

Or can SARS use code 3702 to audit potential business kilometres travelled?



I HAVE often wondered whether SARS officials thoroughly review the submitted logbooks when taxpayers claim for travel expenses incurred as a result of business travel, or are these requested just to tick a box?

This sense of wonder has been recently resolved—SARS audits the logbooks to the extent of even requesting the details of the person or company being visited!

SARS recently changed the format in which logbooks should be captured.  It is now compulsory to keep a logbook of all business kilometres travelled if taxpayers want to claim a travel deduction.

The logbook must contain the following minimum information relating to business travel:

  • The date of travel;
  • Total kilometres travelled (business and private); and
  • Travel details (where to and reason for the trip)

Taxpayers have to record their odometer readings on 1 March each year (the first day of the tax year for individuals), and again on the last day of February the following year (the last day of the tax year for individuals).  The difference between the closing and opening readings will give the total kilometres travelled for the year.

It is true that the above exercise can be quite stressful—sometimes, you could also simply forget to update the logbook timeously—which again poses the question of whether the logbooks submitted to SARS are a true reflection of the taxpayer’s business travel.

SARS however reserves the right to audit and query the content or information recorded by the taxpayer in any logbook.

Is there not a way to redirect SARS’ audit focus and resources onto other things?  Let’s look into this further.


Types of travel allowance

The Income Tax Act allows taxpayers who receive a travel allowance to claim a deduction for the use of their private vehicles for business purposes (Section 8(1)(b)(ii) & (iii) of the Act).

A travel allowance is any allowance paid (or advance given) to an employee in respect of travelling expenses for business purposes.  Generally, the two different travel allowance classifications are:

  • A travel allowance given to an employee to finance transport (for example, a set rate or amount per pay period); and
  • A reimbursement given to an employee based on actual business travel.

Let us now have a look at the difference between the two.


Travel allowance

The total travel allowance (100%) must be reflected on the IRP5 certificate under code 3701.

80% of the travel allowance paid to an employee is subject to the deduction of employees’ tax.  Where the employer is satisfied that at least 80% of the use of the motor vehicle for a year of assessment will be for business purposes, 20% of the allowance is subject to the deduction of employees’ tax.

This determination must be done on a monthly basis to cater for any possible changes in the employee’s circumstances.  A perfect example of this would be the working situation during the current COVID-19 pandemic.  Employees had structured their packages to cater for business travel—but during the pandemic, les (or even no) travel was required.


Reimbursive allowance

A reimbursive travel allowance is where an allowance or advance is based on the actual distance travelled for business purposes (that is, excluding private use). For the 2022 tax year, the rate per kilometre fixed by the Minister of Finance is currently R3.82 per kilometre.

It is fairly common practice that most employers would offer their employees a rate per kilometre that is above the fixed rate by the Minister (e.g. R4.40 instead of R3.82).  In such an instance, the IRP5 code to use is code 3702, which is a taxable code.

Where the employer reimburses the employee at a rate lower than the prescribed rate (e.g. R3.70 instead of R3.82), the IRP5 code to use is 3703 which is a non-taxable code.

Let us now assume that the employee received both travel allowance and reimbursive allowance of code 3702, and discuss below.


Hybrid travel allowances

Where a travel allowance is paid in addition to a reimbursive allowance, or vice-versa, both of the amounts will be combined on assessment by SARS.  These combined allowances will be treated as a taxable travel allowance.

Generally, the employee will then claim a travel deduction based on kilometres travelled.  However, before SARS can allow this deduction, it requires a logbook as already discussed.

Let us now address our question of whether a logbook is required, or whether SARS can use the code 3702 to determine the business travel for the tax year.

Considering the hybrid of travel allowances mentioned above, the general business practice is that employers will reimburse employees based on business kilometres travelled.  Is it not correct, then, to consider what is reflected under the reimbursement code 3702 as business kilometres travelled?  The only question from SARS should then be: How much the employers’ reimbursement rate was, or by how much the employers’ reimbursement rate exceeded the maximum rate set by the Minister?

Example: The total business kilometres travelled for the period is 21 000 km per the taxpayer’s submitted logbook.  The amount that is reflected under code 3702 is R48 000.  It was confirmed that the company reimburses its employees at a fixed rate of R4.40—therefore, the estimated business travel for the said employee should be 10 909 business kilometres (R48 000 / R4.40) that were approved and paid by the employer.

The question for SARS to pose then, would be: Why are the business kilometres per the logbook submitted by taxpayers higher than what was reimbursed by the employer?

Well, it may be arguable that the taxpayer did not claim all their travel expenditure from their employer (for whatever reason), hence the amount reflecting under code 3702 is less than the actual business kilometres per the logbook.

This argument would again be reasonable if the variance between the actual business kilometres per the logbook and deemed business kilometres per code 3702 is not material.

Now, taking the difference of business kilometres not claimed in the above example of 12 091, this would imply that the taxpayer decided to forego R53 200 (12 091 x R4.40) worth of travel reimbursement.

Now, show me an employee that does not want to be compensated or reimbursed for expenditure incurred for business purposes!  If I was a SARS auditor, this return would certainly warrant further scrutiny!  As always, the onus is on the taxpayer or employer to prove to SARS the correctness of the details therein.



Being tax compliant and ‘paying our fair share’ is not just good for taxpayers, but also contributes to the positive growth of our country’s economy, which in turn benefits all South Africans.

In line with SARS’s continued effort to improve compliance and to make it even easier for taxpayers to manage their tax affairs, a review of the process followed currently to claim travel expenses will go a long way.

We therefore urge SARS to continue trying to find ways and means for more taxpayers to be auto assessed—i.e. automatically allowing a travel deduction based on code 3702.  This will help lessen the administration burden of taxpayers having to maintain yearly logbooks, and free up SARS resources to focus on more complex returns.

The normal rule will apply where if a taxpayer is not in agreement with the auto-assessment, they can override it.  However, taxpayers who do so can then expect increased scrutiny from SARS.


Sibongile Jembula is a senior manager for tax services at SNG Grant Thornton.