Employees are often given a choice between being paid a travel allowance as
part of their salaries or being given the use of a company car for work
purposes.
Think carefully before you choose. Here are some things you should take
into account.
Firstly, and most importantly, are you the sort of person who prefers to
own things? Tax savings mean nothing if you are the type of person who
would rather own than use someone else's property.
Secondly, does your work require you to travel long distances and are you
prepared to keep a record of kilometres and costs (a logbook)? If you are
diligent enough to keep a logbook - which I recommend you do if you are
expected to travel more than 32 000 kilometres a year - and you travel
extensively for work reasons using your car, a travel allowance is an
obvious choice because each and every business kilometre you record in your
car counts as an expense against your travel allowance.
Thirdly, are there restrictions in the use of the car? This will differ
with circumstances but you have to assess whether the restrictions are
acceptable to you.
Fourthly, do you have a choice as to what car is given to you?
Finally what are the implications when your package is reviewed? Do you get
a different car if you are promoted? Will the travel allowance increase and
by how much?
Note that many people fall into a very dangerous trap. Because only 50
percent of the travel allowance is subjected to tax on your pay-slip and
hence not the full 100 percent of your monthly pay is taxed, people tend to
prefer a travel allowance. This advantage is temporary and believe me, you
should rather pay tax over a period of 12 months than have to write a
cheque to the Receiver directly out of your bank account or have to
specifically withdraw money and pay when you submit a tax return!
Also note that should you use a company car and later decide to purchase it
from your employer - which is a common occurrence - the tax implications
will normally be a bit on the steep side.
I advise you to consider all factors equally and not necessarily choose an
option that causes you to pay less tax. For example, if you prefer the
travel allowance option but the area you live in makes this a bad idea
(weather, theft, road conditions, for instance), I would opt for a company
car.