Question 1

What is the difference between a travel allowance and a company car?

Accepted Answer

With a travel allowance, you own the car and receive a fixed monthly amount from your employer. You can deduct business travel costs to reduce the taxable portion. With a company car (fringe benefit), your employer provides the vehicle and you pay tax on a deemed monthly value based on the cost of the car.

Question 2

What is the company car fringe benefit rate?

Accepted Answer

The fringe benefit is calculated at 3.5% of the determined value (cost including VAT) of the vehicle per month. If the vehicle was the subject of a maintenance plan when the employer acquired it, the rate is 3.25% per month. The private use portion of this amount is added to your taxable income.

Question 3

How can I reduce the taxable fringe benefit?

Accepted Answer

Keep a detailed logbook of all business and private kilometres. Without a logbook, SARS deems 80% of use as private. With an accurate logbook showing higher business use, you can reduce the private use percentage and therefore the taxable amount significantly.

Question 4

Which is better — a travel allowance or a company car?

Accepted Answer

If you do a lot of business travel (high business kilometres), a travel allowance is usually more tax-efficient because you can deduct a larger portion. If your business travel is low, a company car may be simpler as the employer handles all vehicle costs and you just pay tax on the fringe benefit.

Question 5

Is VAT included in the determined value for fringe benefit?

Accepted Answer

Yes, the determined value of the vehicle includes VAT. The 3.5% (or 3.25% with a maintenance plan) is calculated on the full cost of the vehicle including VAT, as this represents the total cost to the employer.

Feature	Company Car	Travel Allowance
Vehicle Ownership	Employer owns the car	Employee owns the car
Tax Calculation	3.5% of cost per month	Allowance less deductions
Maintenance Plan	Reduces rate to 3.25%	N/A
Logbook Required	To reduce 80% deemed private use	To claim business km deduction
Best For	Low business travel	High business travel

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