Travel, Rent, and Tax: When Employer Support Becomes a Fringe Benefit
❓ Member Query
A CIBA member asked how an employer can support an employee—recently re-employed and relocated from Johannesburg to Cape Town—in a tax-efficient way. The employee:
Rents accommodation in Cape Town,
Travels twice monthly to visit family in Johannesburg.
The employer wants to assist with accommodation and travel costs while minimising fringe benefit tax liabilities.
✅ Our Response
Under the Seventh Schedule to the Income Tax Act, any benefit an employer provides to an employee is deemed taxable, unless it qualifies for a specific exemption. The key factor SARS looks at is whether the cost is a business expense or a private benefit.
🔍 Private vs Business Expense
The distinction is critical:
Business expenses (e.g., travel for client meetings, relocation for a fixed-term project) may be exempt from fringe benefit tax.
Private expenses (e.g., personal travel or residential rent) are not exempt, even if paid by the employer—they are taxed as part of the employee’s income.
🏠 Accommodation Support
If the employer rents accommodation from a third party for the employee, it is viewed as a private benefit (i.e. personal living cost), and is thus a taxable fringe benefit. It must be disclosed under SARS code 3805.
The only exception is when accommodation is provided as part of a temporary operational relocation, typically lasting less than two years and clearly linked to business necessity.
✈️ Travel Support
When the employer covers the cost of air travel between the employee’s work location and family home, it is treated as a private expense unless it serves a direct business purpose. This too is considered a taxable fringe benefit, reportable under code 3806, and subject to PAYE.
The employer can deduct the expense as a business cost, but only if PAYE is correctly applied and disclosed.
🧾 Legislative References
Income Tax Act – Seventh Schedule: Paragraphs 2(a), 9(7), and 10
💡 In Summary
Any form of financial support to the employee, whether through direct payment or fringe benefits, increases taxable income and is subject to PAYE unless specifically exempt.
