Cost per kilometre is the operating number that decides whether a transport business makes money. Most operators price on gut feel and discover a route was loss-making only when the year-end statements arrive — by which point they have run it two hundred times.
Transport also has two financial features other industries do not: a diesel refund scheme that a meaningful number of eligible operators never claim, and a fleet whose finance structure materially changes both the tax position and the balance sheet.
Cost per kilometre
The calculation: total operating cost ÷ total kilometres travelled, for a defined period and ideally per vehicle.
Split it into two parts, because they behave differently.
Variable cost per kilometre
Costs that rise directly with distance:
Fuel
Tyres
Servicing and maintenance
Oil and consumables
Tolls
Fixed cost per kilometre
Costs incurred whether the vehicle moves or not, divided by the kilometres actually travelled:
Vehicle finance instalments
Insurance
Licensing and permits
Driver salary, where the driver is permanent
Tracking and telematics
Depreciation
Why the split matters: fixed cost per kilometre falls as utilisation rises. A truck doing 12,000 km a month carries far less fixed cost per kilometre than the same truck doing 6,000. Utilisation is usually the biggest lever in a transport business, and it is invisible unless you calculate cost per kilometre per vehicle.
Worked example. A vehicle with R48,000 of monthly fixed costs.
| Monthly kilometres | Fixed cost per km |
|---|---|
| 6,000 | R8.00 |
| 9,000 | R5.33 |
| 12,000 | R4.00 |
Add variable cost of, say, R6.50 per kilometre and the total ranges from R14.50 to R10.50 depending purely on utilisation. A rate that is profitable at 12,000 km is loss-making at 6,000.
Calculate it per vehicle, monthly. Fleet averages hide the vehicle that is quietly costing you money.
The diesel refund
This is the most commonly missed item in South African transport accounting, and it is worth real money to those who qualify.
The diesel refund scheme allows qualifying users to claim back a portion of the fuel levy and Road Accident Fund levy on diesel used in eligible activities.
Eligible activities are prescribed and include primary production sectors such as farming, forestry, fishing and mining, together with certain other qualifying uses. Ordinary road freight haulage is generally not eligible, which is the point most articles get wrong — but operators with mixed activities, on-site plant, or qualifying operations frequently do have a claim they are not making.
To claim you must:
Register for the diesel refund with SARS, using the VAT101D or VAT102D application
Be registered for VAT
Keep detailed logbooks of diesel purchased and used, by activity and by vehicle or plant
Claim through the VAT201 process
The record-keeping is the barrier. The claim requires substantiated litres by eligible use, and operators without that discipline cannot claim even where they qualify.
Worth assessing properly. If any part of your operation involves qualifying activities, have the eligibility reviewed — the annual value is frequently substantial, and unclaimed refunds within the prescribed period may still be recoverable.
Fuel and VAT
Petrol and diesel are zero-rated. There is no VAT on the fuel itself, so there is nothing to claim.
This surprises operators whose largest single cost is fuel and who expect a correspondingly large input VAT claim. Your input VAT will be low relative to turnover, and a transport business is generally in a payment position rather than a refund position.
What does carry claimable VAT: tyres, servicing, parts, tolls, insurance administration, tracking subscriptions, and the vehicles themselves where they fall outside the "motor car" definition.
Vehicle input VAT. Trucks, panel vans and single-cab bakkies generally fall outside the motor car definition, so input VAT on acquisition is claimable. Double-cab bakkies are commonly treated as motor cars and denied. Confirm before purchase — on a R700,000 vehicle the difference is roughly R91,300. See the expenses you can never claim VAT on.
Financing the fleet
How you fund vehicles changes the tax position, the balance sheet and your borrowing capacity.
| Instalment sale / finance | Operating lease | Cash purchase | |
|---|---|---|---|
| Ownership | You, on settlement | Lessor | You |
| On balance sheet | Yes, with matching liability | Depends on the lease terms and standard applied | Yes |
| Deduction | Interest + wear and tear | Lease rentals | Wear and tear |
| Input VAT | Generally claimable upfront on the asset | Generally on each rental | Claimable on purchase |
| Effect on gearing | Increases | Depends on treatment | None |
The wear and tear position: delivery vehicles are typically written off over four years and other motor vehicles over five, per SARS Binding General Ruling 7. See wear and tear allowances.
The recoupment nobody plans for. Selling a truck for more than its tax value produces a recoupment added to taxable income. Fleet replacement cycles routinely generate taxable recoupments that were never in the provisional tax estimate.
Worked example. A truck cost R900,000, wear and tear claimed R540,000, tax value R360,000. Sold for R480,000.
Recoupment: R120,000 added to taxable income
Tax at 27%: R32,400
Replace four vehicles in a year and that is a six-figure surprise.
Driver payroll
Heavier than headcount suggests, for three reasons.
Variable pay. Overtime, trip allowances, night-out allowances and standby pay all change the monthly calculation and the PAYE with it.
Subsistence allowances. For overnight domestic travel, R595 a day is the deemed amount for meals and incidental costs, or R184 a day for incidentals only, for 2026/27. Paid within these limits and properly recorded, these are not subject to PAYE — which makes them one of the more efficient ways to compensate long-haul drivers. Records of the nights away are essential.
Bargaining councils. The road freight sector is covered by a bargaining council with prescribed wages, allowances and levies that override the national minimum wage. Check whether your operation falls within its scope, because compliance is not optional and the rates sit above statutory minimums.
Minimum wage check. Where a council does not apply, check hourly against the national minimum wage of R30.23 per hour from 2 March 2026 — and remember that one employee below it disqualifies your entire ETI claim for that month. See the Employment Tax Incentive explained.
Owner-drivers and subcontracted hauliers
Many operators use owner-drivers, and the classification question is live.
An owner-driver who owns their vehicle, carries their own risk, works for several operators and decides how the job is done is a genuine contractor.
An owner-driver working exclusively for you, on your schedule, in your livery, effectively as a driver who happens to own the truck, is closer to an employee — and the statutory presumptions turn on control over the manner of work and hours.
The safe harbour: the presumptions do not apply where the person employs three or more full-time unconnected employees.
Also check COIDA cover. A principal is generally expected to ensure people working on its operations are covered, and an uninsured subcontractor can become your exposure. See what is COIDA.
The numbers to watch monthly
| Metric | Why |
|---|---|
| Cost per kilometre, per vehicle | The core operating number |
| Utilisation — km per vehicle per month | The biggest lever on fixed cost per km |
| Revenue per kilometre by route or client | Which work is actually profitable |
| Empty running percentage | Kilometres travelled without revenue |
| Fuel consumption — litres per 100 km, per vehicle | Deteriorating consumption signals a mechanical or driver issue |
| Maintenance cost per kilometre, per vehicle | Identifies the vehicle approaching replacement |
| Debtor days | Freight customers frequently pay at 60 days or beyond |
Empty running is the hidden cost. A return leg with no load carries full variable cost and zero revenue. Operators who measure it usually find backhaul opportunities that materially change route profitability.
Frequently asked questions
How does accounting work for a transport business in South Africa? Costs are tracked per vehicle and converted into a cost per kilometre split between variable and fixed, so route and client profitability can be assessed. Fuel is zero-rated so input VAT is low relative to turnover, vehicle finance structure affects both tax and gearing, and driver payroll involves variable pay and subsistence allowances.
How do I calculate cost per kilometre? Divide total operating cost by total kilometres travelled, per vehicle and per month, splitting variable costs such as fuel, tyres and maintenance from fixed costs such as finance, insurance, licensing and driver salary. Fixed cost per kilometre falls sharply as utilisation rises, which is why it must be calculated per vehicle.
Can I claim the diesel refund in South Africa? Only for prescribed eligible activities such as farming, forestry, fishing and mining, together with certain other qualifying uses. Ordinary road freight haulage is generally not eligible, but operators with mixed activities frequently do have a claim. You must be VAT registered, register for the diesel refund, and keep detailed logbooks of diesel by eligible use.
Can I claim VAT on diesel? No. Diesel and petrol are zero-rated, so no VAT is charged and there is nothing to claim. Tyres, servicing, parts, tolls and tracking do carry claimable VAT.
Can I claim input VAT on a truck? Generally yes. Trucks, panel vans and single-cab bakkies fall outside the VAT Act's motor car definition, so input tax on acquisition is claimable. Double-cab bakkies are commonly treated as motor cars and denied, so confirm the treatment before purchase.
How are subsistence allowances for drivers taxed? For overnight domestic travel, R595 a day is deemed for meals and incidental costs and R184 a day for incidentals only for 2026/27. Paid within these limits and properly recorded, they are not subject to PAYE, which makes them an efficient way to compensate long-haul drivers.
Are owner-drivers employees or contractors? It depends on substance. An owner-driver carrying their own risk, working for several operators and controlling how the job is done is a genuine contractor. One working exclusively for you on your schedule and in your livery risks being an employee, with the PAYE, penalties and interest consequences that follow.
What happens tax-wise when I sell a truck? Where proceeds exceed the tax value, the difference up to original cost is recouped and added to taxable income. Fleet replacement cycles routinely generate taxable recoupments, and they should be built into the provisional tax estimate rather than discovered on assessment.
Per-vehicle numbers, monthly
A transport business run on a fleet average is being run on a number that hides its worst vehicle and its worst route. Cost per kilometre per vehicle is the difference between pricing from data and pricing from memory.
Smartbook sets up per-vehicle costing, calculates cost per kilometre monthly, assesses diesel refund eligibility, and handles driver payroll including subsistence allowances and bargaining council requirements.
Last reviewed: 26 July 2026. Written by the Smartbook team — SAIPA and SAICA accredited, SARS registered tax practitioners. Diesel refund eligibility is prescribed and fact-specific — have your own activities assessed rather than relying on general guidance. Bargaining council coverage depends on your operation's scope. Worked examples are illustrative.
Primary sources: SARS — Value-Added Tax · SARS — VAT101D Application for Registration of Diesel Refund · SARS — Budget 2026 Frequently Asked Questions · Department of Employment and Labour