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Tax benefits for car allowances

2008-09-05

If you receive the use of an employer-owned motor vehicle as a fringe benefit, the taxable benefit in your hands is determined as follows:


Value to be placed on the benefit: For each month during which the employee is entitled to use the vehicle for private purposes, the value is -

  • 2,5% of the determined value of the motor vehicle; or
  • If the employee has the use of more than one motor vehicle simultaneously, the value of the second or successive vehicle must be calculated at 4% - the vehicle with the highest determined value must be taxed at 2,5%; and
  • If the employee receives a travel allowance in respect of the relevant vehicle, the value must be calculated as if the vehicle is the second vehicle (4%).

However, there are two situations in which such benefit can be reduced for tax purposes.

1.       Where the employee does not receive a travel allowance or advance in respect of the vehicle and the employee -

•·         bears the cost of all fuel used for the purposes of the private use of the vehicle, the monthly value of the benefit must be determined by deducting 0,22 percentage points from the percentage to be applied to the determined value of that motor vehicle.

•·         bears the cost of all maintenance (including repairs, servicing, tyres, etc.), the monthly value of the benefit must be determined by deducting 0,18 percentage points from the percentage to be applied to the determined value of that motor vehicle.

•·         pays any consideration for the private use of the vehicle, it must be deducted from the value of the benefit. However, where the employee receives a travel allowance in respect of the relevant vehicle, no consideration paid for the use of the vehicle may be deducted from the benefit.

2.       If the employee keeps an accurate record of the distance travelled for private purposes and the distance so travelled is less than 10 000km per year, the Commissioner may, when the employee's income tax assessment is raised for the relevant year, place a lesser value on the private use of the vehicle.  The employee must retain an accurate logbook showing actual distances travelled.

Source : Moneyweb

 

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