What is Code 3701 on a South African Payslip?
Your travel allowance explained — why 80% is taxed via PAYE, how the R4.95/km SARS rate works, and how a logbook can reduce your annual tax bill.
3701Code 3701 is your fixed travel allowance — a monthly amount your employer pays to cover business travel in your personal vehicle. SARS requires 80% of this allowance to be included in your taxable income for PAYE. At year-end you can claim a deduction for actual business kilometres, potentially recovering some of the PAYE deducted.
Also useful from PayTools
What Code 3701 Means
Code 3701 is an allowance in the 3700 series, covering amounts your employer pays to help meet specific work costs. A 3701 travel allowance is a fixed monthly sum paid to cover the cost of using your own vehicle for business purposes — client visits, inter-site travel, or business trips away from your regular workplace.
Unlike a reimbursement (where you submit receipts and are paid back), a code 3701 allowance is paid regardless of how many kilometres you actually drive in a given month. The amount is typically agreed upfront in your employment contract or letter of appointment.
The rule that confuses most employees: SARS doesn't allow travel allowances to be paid tax-free at source. Your employer must include 80% of the allowance in remuneration when calculating monthly PAYE; the remaining 20% is exempt at source, on the assumption that 80% of your driving is private — correctable at year-end with a logbook.
The 80/20 Rule — How PAYE Is Calculated on Code 3701
Your employer takes the 3701 travel allowance, multiplies it by 80%, adds that to your 3601 salary, and calculates PAYE on the combined total — only the 20% remainder is tax-exempt at source.
| Item | Example Figures |
|---|---|
| Monthly gross salary (code 3601) | R25,000 |
| Monthly travel allowance (code 3701) | R5,000 |
| 80% included in PAYE remuneration | R4,000 |
| 20% exempt at source | R1,000 |
| Effective taxable income for PAYE | R29,000/month |
| Annual taxable income (× 12) | R348,000 |
Your full R5,000 allowance appears as code 3701 on both your payslip and IRP5. However, PAYE is only calculated on R29,000 per month (R25,000 salary + R4,000 = 80% of travel allowance), not on the full R30,000.
Claiming Business Kilometres at Year-End
The 80/20 split is a default — it can be improved in your favour at year-end. With a SARS-compliant logbook of business trips, you can claim a deduction based on actual kilometres driven.
For the 2026/2027 tax year, SARS's simplified prescribed rate is R4.95 per kilometre (up from R4.76). Multiply your annual business kilometres by R4.95 to claim the deduction against your 3701 allowance.
If your actual business kilometre claim exceeds the 20% already exempt at source, SARS refunds the difference. If it is less than the 20%, no additional deduction is available.
Travel between home and your regular workplace is private travel under SARS rules and can't be claimed as business kilometres. Only genuine business trips qualify — claiming commuting as business travel is a common audit trigger.
Logbook Requirements for Code 3701
To claim business kilometres against a code 3701 allowance, your logbook must record the following for every business trip:
- Date of the trip
- Starting point and destination
- Distance travelled (in kilometres)
- Business purpose of the trip
- Opening and closing odometer readings for the tax year
SARS provides a free eLogbook downloadable from sars.gov.za. Without an adequate logbook, SARS will deny the business km claim and your final tax assessment will be based on the 80% included in PAYE — meaning no further deduction is available.
Frequently Asked Questions
What does code 3701 mean on my payslip?
Code 3701 is your fixed travel allowance — a set monthly amount your employer pays to cover business travel in your personal vehicle. SARS requires 80% of this allowance to be included in your PAYE calculation at source. At year-end you can claim a deduction for actual business km driven, which may reduce your tax liability below the 80% that was taxed.
Why is 80% of my travel allowance taxed?
SARS applies an 80/20 default: it assumes 80% of your travel is private unless you prove otherwise with a logbook. The 80% is taxed at source as a precaution. When you file your return and submit logbook data, SARS adjusts the deduction for actual business km — so if you drove substantial business km, you can recover some of the PAYE deducted.
What is the SARS rate per km for 2026/2027?
The SARS simplified prescribed rate for the 2026/2027 tax year (1 March 2026 to 28 February 2027) is R4.95 per kilometre, increased from R4.76 in 2025/2026. This rate applies when you claim business km without tracking all actual vehicle costs. The deemed cost method using SARS's fixed cost table may yield a higher deduction for higher-value vehicles.
Does my daily commute count as business travel?
No. Travel between your home and your regular place of work is private travel under SARS rules and cannot be included in your business km claim. Only trips for genuine business purposes — client visits, inter-site travel, business meetings away from your regular workplace — qualify. Claiming commuting km as business travel is a common audit trigger.
Do I need a logbook for code 3701?
For the simplified R4.95/km claim, a logbook is strongly recommended even though not strictly mandatory. For the deemed cost method (fixed cost table), a detailed SARS-compliant logbook is mandatory. Without a logbook, SARS will reject the business km deduction and only the 20% source exemption applies — meaning no further refund is available at year-end.
What is the difference between code 3701 and code 3702?
Code 3701 is a fixed travel allowance — a set monthly amount paid regardless of actual km driven. Code 3702 is a reimbursive allowance — you claim back actual km at a rate per km. Reimbursements at or below the SARS rate (R4.95/km) are generally not taxable under code 3703. Reimbursements above that rate become partially taxable under code 3722.