A taxable allowance is a regular, additional payment an employer makes to an employee - covering things like cellphone, tool or housing costs - that SARS treats as fully taxable income rather than a reimbursement of business expense.
What it means
Not every extra payment is taxed the same way. A taxable allowance is added to gross remuneration in full and taxed through PAYE like ordinary salary, in contrast to a genuine reimbursement of a business expense (which is not remuneration at all) or an allowance like the travel allowance that SARS only partially includes.
Where it fits in
Taxable allowances are summed into gross remuneration before the PAYE calculation runs, and are reflected as separate income source codes on the IRP5 so SARS can see the breakdown of an employee's total package, not just a lump salary figure.
Key rules
- Included at 100% in taxable income, unlike the travel allowance's partial inclusion.
- Must be distinguished from expense reimbursements, which are not remuneration and are not taxed.
- Reported under its own SARS source code on the IRP5, separate from basic salary.
- Recurring by nature - a once-off reimbursement or ad hoc payment is not the same as an allowance.
