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Allowances for transport costs

September 15, 2023

In certain circumstances an employee can receive a non-taxable allowance for
additional costs of transport from home to work.
What’s important here is that the cost of travelling from home to work is a personal cost.
However, there can be additional costs.
Follow this three-step process to determine whether you can pay a non-taxable allowance for
the additional cost of transport:

1. Do any of the factors required for the exemption to additional transport costs apply?
(See list below.)

2. Does the employee incur the additional transport costs for the employer’s benefit or

3. Calculate the additional transport costs and compare them with the allowance paid.
The factors that can give rise to the exemption for additional transport costs are:
(a) the day or time of day when the work duties are performed
(b) the need to transport any goods or material for use or disposal in the course of the
employee’s work
(c) the requirement to fulfil a statutory obligation
(d) a temporary change in the employee’s place of work while in the same employment
(e) any other condition of the employee’s work
(f) the absence of an adequate public passenger transport service that operates fixed routes and a regular timetable for the employee’s place of work.

To get a fuller understanding of these factors, look at the Inland Revenue publication Operational Statement 23/01 or confer with us. OS 23/01 expands on the six points above and provides illustrations.
There is a risk if you pay additional transport costs and circumstances change, the
employee might look upon the exempt income as part of their salary/wage package and
not be happy about it being cancelled. The reimbursement for any employee for any one day is limited to 70km.

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