A subsistence allowance is any allowance given to an employee or a holder of any office for expenses incurred or to be incurred in respect of personal subsistence and incidental costs such as meals and drinks.
SimplePay has built-in items to accommodate the special tax and reporting requirements related to international and local subsistence allowances. To add a subsistence allowance, go to an employee’s profile and click on Add (next to Payslip Inputs). You can then select one of the following:
Subsistence Allowance International
This item should be used where the accommodation to which the allowance or advance relates is outside the Republic.
SARS prescribes an amount that is deemed to be expended for each day (or part of a day) that is spent in another country. A complete list of countries and amounts deemed to have been expended can be found on the SARS website under Foreign.
After going to Add (next to Payslip Inputs) > Subsistence Allowance International, you have to enter the following:
- Total Paid to Employee: this is the total amount of the allowance or advance that was paid to the employee, e.g. R6,000.
- Maximum Daily Deemed Amount: this amount must be calculated with reference to the deemed amount found on the above-mentioned website.
- For example, if the employee travelled to China, the deemed expended amount might be around USD127. You then have to convert the dollar amount into rands and enter it in this field. If the exchange rate is $1:R13.50, you would enter 127 x 13.50 = 1,714.50 in this field.
- Number of days: enter the number of days that were spent outside the Republic, e.g. 3.
The international subsistence allowance in the example above will be reported on the IRP5 as follows:
- Code 3714 Other allowances (Non-Taxable): R5,143 – calculated as 1,714.50 x 3 = 5,143.50, with the fifty cents being dropped
- Code 3715 Subsistence allowance – foreign (exceeding deemed amount): R856 – calculated as 6,000 – 5,143.50 = 856.50, with the fifty cents being dropped
Subsistence Allowance Local
This item should be used where the accommodation to which the allowance or advance relates is in the Republic.
The Finance Minister annually announces the amounts deemed to be expended and these are published on the SARS website. There are different daily amounts for incidental costs only, and for meals and incidental costs.
After going to Add (next to Payslip Inputs) > Subsistence Allowance Local, you have to enter the following:
- Costs for Reimbursement: select either “Incidental Costs Only” or “Meals & Incidental Costs”.
- Full Amount Paid to Employee: this is the total amount of the allowance or advance that was paid to the employee, e.g. R4,000.
- Number of days: enter the number of days that were spent away from the employee’s usual place of residence, in the Republic, e.g. 7.
Assuming that you selected “Meals & Incidental Costs” in the example above, the local subsistence allowance will be reported on the IRP5 as follows in the 2018 tax year:
- Code 3714 Other allowances (Non-Taxable): R2,779 – calculated as 397 (deemed amount) x 7
- Code 3704 Subsistence allowance – local (exceeding deemed amount): R1,221 – calculated as 4,000 – 2779