What Is A Subsistence Allowance?

A subsistence allowance is where an employer may pay an employee a daily allowance for accommodation and meals during a period while the employee is out of town on business. The subsistence allowance to be included in taxable income of an employee is calculated as follows:

  • Subsistence allowance received less portion spent for business purposes equals the taxable allowance to be included in the employee’s taxable income.

The Act prescribes standard amounts which an employee is automatically entitled to deduct. If an employee wishes to claim more than these standard amounts, he/she must keep all relevant documentation as proof of expenses actually incurred. The deduction may never exceed the allowance received.

The deductible expenses are based on the standard amounts as per the Act or on actual expenses incurred. The portion of the allowance which was not spent is included in gross income.

For the purposes of determining the taxable portion of the allowance, the employee has the option to use the following as the portion expended for business purposes:

  • Actual Figures: The amount actually incurred in respect of accommodation, meals and other incidental costs if proved by the commissioner.
  • Deemed Figures: Where an employee has not provided proof of actual expenditure, the exclusion for each day or part of a day that the employee is away from his usual place of residence is an amount per day in respect of meals and other incidental costs, or incidental costs only as determined by the commissioner for a country or region by way of notice in the Government Gazette.

The amounts in respect of travelling abroad will only apply in respect of continuous periods spent outside the republic not exceeding six weeks.

An employer must pay a subsistence allowance to an employee over and above the normal remuneration payable to the employee and cannot reduce the cash portion an employee’s salary with a subsistence allowance.

Contacts us if you have any questions about how a subsistence allowance is calculated or applied.