Travel & Expense: Why Your Per Diem isn’t a License to Shop
A per diem (from the Latin for per day) is a daily stipend given to business travellers to cover food and incidental expenses while they’re on the road. It’s not, in fact, a perk to make up for the inconvenience of being away from home – or a little extra spending money to splurge on spoils and souvenirs.
As Arlette Manyi, Tax Risk Manager at FirstRand Bank Limited explained at the recent GBTA Southern Africa Conference in Johannesburg, per diems can have unforeseen tax implications if travellers (and employers) don’t tow the line when it comes to their travel and expense policy.
SARS updated both their local and international subsistence allowances in February 2024. While foreign subsistence allowances differ country by country, travel within the Republic of South Africa is pegged at either R522 per day (for all meals and incidentals) or R161 per day (for incidental costs only).
Many people don’t realise that SARS has these guidelines in place – or that per diems are regulated by the Income Tax Act of 1962. According to the act, per diems are not subject to personal income tax if they fall within the limits set by SARS. But things become tricky if they do not appear on your payslip, are not reported to SARS, are not used for their intended purpose, or exceed legislated limits.
Luckily, you don’t need to keep receipts from a business trip if your per diem allowance is within the limit set by SARS. But if you’ve been given more than the deemed amount (for local or international travel) you need to keep your receipts for five years. SARS can look at your travel spend if you are ever audited, and if you are found non-compliant the interest and penalties can put both you and your company at risk.
“When you file your tax return, SARS has the right to check where you have travelled and even ask you to prove it was for business,” says Bonnie Smith, GM Corporate Traveller. “They may look at how you’ve spent your per diem allowance and flag non-compliance.”
For Smith, a clearly worded travel policy is invaluable.
“With SARS cracking down, make sure your travellers know exactly how much they have to spend on food or incidentals per day, and what they can spend it on. For example, if their hotel accommodation is on a B&B basis, employees may be allowed to expense a certain amount for lunch and dinner, but not breakfast or alcoholic beverages,” says Smith. “Also, make it clear if unspent funds should be returned to the company.”
It’s also important to agree on what the term ‘incidental’ might cover. For example, parking fees or laundry costs might be acceptable, while gifts for the team back home might not!
According to Smith, business travellers should avoid these five bad habits:
1. Luxury splurges. While designer swag might be tempting, your expense account is not a licence to shop. Any purchases beyond necessary business travel expenses could land you in hot water – with both your boss and SARS officials.
2. Skipping meals. Redirecting money from food to shopping is not what your per diem is for. Proper meals are an important part of your trip and essential for your health and productivity.
3. Per diem piggy-banking. Similarly, while squirreling away your subsistence allowance for a rainy day might seem like a good idea, Smith says it definitely won’t be in the spirit of your company’s travel policy (keep in mind too, that consistent underspending might affect future allowances).
4. Souvenir overload. Bringing back gifts for the entire office? Reconsider. While a small token might be fine, excessive gift-buying can appear unprofessional and wastes company resources.
5. Unexpected tech spend. Panic buying gadgets at the airport can burn through your daily allowance. Instead, plan ahead. Make a list of everything you might need (from power banks and charging cables to travel adapters) and ensure they’re safely stored in your carry-on bag.
If you’re updating your travel policy – or developing one for the first time – it’s worthwhile approaching a travel management company for advice. “Often travellers don’t understand how per diem allowances are taxed,” says Smith. “They’re not sure when, or how, to log their expenses, or what purchases might be considered non-compliant. A TMC can you help you put clear guidelines in place and answer any questions you might have.”
About Corporate Traveller
Corporate Traveller is a division of the Flight Centre Travel Group, dedicated to saving businesses across Southern Africa time and money. Corporate Traveller has the benefit of being part of the world’s third-largest travel retailer, leveraging its global negotiating strength. It has access to over 50 of the world’s leading airlines and deals with more than 100 000 hotels around the world to guarantee savings for clients. Corporate Traveller provides clear, consolidated reporting of all its clients’ travel activities, helping them to control travel spend and identify opportunities to save costs.
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