Budget 2026 Travel Allowances: What Changes from 1 March
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SARS has issued three important notices effective for years of assessment commencing on or after 1 March 2026. If you process payroll, review travel claims, or advise clients on allowances, these updates are not optional — they affect how reimbursements are taxed and how deductions are calculated.
1. Subsistence Allowance – Day Travel (Meals and Incidentals Only)
SARS has determined the maximum daily amount for meals and incidental costs under section 8(1)(a)(ii)(aa) of the Income Tax Act to be R184 per day. This applies where an employee is away from their usual place of work but does not stay overnight.
What this means for you:
If your client pays a subsistence allowance for local day travel, the tax-free portion is capped at R184 per day. Anything above this may have PAYE implications. Payroll systems must be updated accordingly.
2. Subsistence Allowance – Overnight Travel (Local and International)
For overnight travel, SARS has published updated deemed expenditure amounts under section 8(1)(a)(i)(bb).
From 1 March 2026:
Incidental costs only (local): R184 per day
Meals and incidental costs (local): R595 per day
Foreign travel: Country-specific daily amounts (see schedule).
The foreign travel table (pages 2–7 of the notice) lists specific daily amounts per country, for example:
United Kingdom – GBP 114
United States – USD 178
Germany – EUR 125
Other countries not listed – USD 215.
This is important because:
If allowances fall within these prescribed limits, employees do not need to submit supporting vouchers to claim the deemed deduction. However, once payments exceed these thresholds, detailed substantiation becomes critical.
What you should do now:
Review and update travel and subsistence policies to reflect the new limits effective 1 March 2026.
Ensure payroll systems are aligned with the updated thresholds to prevent over- or under-withholding of PAYE.
Make sure clients clearly understand the distinction between an “incidental costs only” allowance and a “meals and incidental costs” allowance, as the limits differ.
For international travel, always verify the specific country rate in the SARS schedule before approving or paying a travel advance.
3. Motor Vehicle Rate per Kilometre
The Minister of Finance has issued the new rate per kilometre under section 8(1)(b)(ii) and (iii).
Two key points:
A. Cost Scale Method
The rate is calculated using a sliding scale based on the vehicle’s value. The schedule (page 3) sets out:
Fixed cost (annual amount)
Fuel cost (cents per km)
Maintenance cost (cents per km).
Examples:
Vehicles not exceeding R115 000
Fixed cost: R38 344
Fuel cost: 132.9 c/km
Maintenance cost: 49.1 c/km
Higher-value vehicles have progressively higher cost components.
B. Simplified Method
Where section 8(1)(b)(iii) applies and no additional compensation is paid (other than parking or tolls), the optional flat rate is 495 cents per kilometre
What you should do now:
Recalculate travel reimbursements for 2026 tax years
Confirm whether clients are using the cost scale or simplified method
Ensure logbooks are accurate — SARS scrutiny on travel claims remains high
Review employment contracts and travel policies for alignment
The Bigger Picture
Travel allowances are one of the most common areas where employers make mistakes — either overtaxing employees or creating SARS exposure by under-withholding. Small errors here can trigger audits, penalties, and disputes.
Now is the time to:
Update payroll templates
Brief HR departments
Inform affected clients
Review internal controls around travel reimbursements
If you advise SMEs or run a practice, this is a simple but powerful value-add conversation to have with every employer client before 1 March 2026.
Read more in the SARS Notices below:
Fixing of rate per kilometre in respect of motor vehicles – section 8(1)(b)(ii) and (iii)
Determination of the daily amount in respect of meals and incidental costs for purposes of section 8(1) – overnight allowance
