SA Revenue Services (SARS) has expanded on statements in the March Budget which tightened fringe benefit allowances on residential accommodation and motor vehicles.
Mike Dunster, director of taxation at BDO Spencer Steward, said the most significant impact of the latest ruling was to close the opportunity used by some taxpayers to have both a travel allowance and a company car.
The travel allowance provisions were being used to fund one vehicle while a company car was being used as a second vehicle. The perceived advantage was that the monthly taxable benefit on the company car was 1,8 percent of its value instead of the four percent on second company cars as proposed in the Budget. The Budget proposed raising tax on company cars to 1,8 percent from 1,2 percent and on second company cars to from two to four percent.
SARS said last week that a taxpayer with a travel allowance and another car which is recognised as a company car will be taxed at four percent of the determined value of the second vehicle, and not at 1,8 percent. "This closes quite a loophole," Dunster said.
On residential accommodation, SARS has made a slight concession, allowing R3 000 a year to be deducted from the value of the residential benefit to employees. This is intended to ease some of the hardship as a result of the latest Budget measures.
The following is an example of the effects of SARS's latest announcement, for a person earning R8 000 a month, with a company car valued at R75 000 and provided with a house worth R3 000 a month in rental and R400 a month in free water and electricity.
BEFOREAFTER
Salary
Taxable benefit of company car
Residential accommodation taxable benefitR1 013*R3150**
Taxable incomeR9913R12500
Tax payable (per monthly tax tables)
R3345.26R4503.33
Tax increase after changes: R1158.07 (34,62%)
* {(12 x 8000) - 20000} x 16/100 x 1/12
** (Rental+water+electricity=R3400
Less allowance (R3000/12)=R250)