Why is there a difference in the AA and SARS R/km rate?

The difference between the AA (Automobile Association) rate and the SARS (South African Revenue Service) rate per kilometre for business mileage in South Africa stems from their distinct purposes and methodologies for calculating costs.

Key Differences:

1. Purpose:
• AA Rate: The AA rate is often used as a guideline for motorists to estimate the total cost of vehicle ownership and operation, including expenses like fuel, maintenance, insurance, and depreciation.
• SARS Rate: The SARS rate is specifically designed for tax purposes, providing a standardized rate that taxpayers can use to calculate allowable deductions for business travel. It may not encompass all costs associated with vehicle ownership.
2. Calculation Methods:
• AA Rate: The AA conducts surveys and considers various factors, including fuel prices, repair costs, and overall vehicle expenses. This rate is typically higher to reflect the comprehensive costs of running a vehicle.
• SARS Rate: The SARS rate is based on simpler criteria to standardize deductions across taxpayers and may reflect average costs rather than the full spectrum of vehicle expenses.
3. Updates and Adjustments:
• The AA adjusts its rates more frequently based on current market conditions, while the SARS rate is set annually and may not reflect immediate changes in fuel prices or operating costs.

Conclusion:

Due to these differences in purpose and calculation, you may find that the AA rate is higher than the SARS rate. It's important to choose the rate that aligns with your specific needs, especially when calculating deductions for tax purposes.