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The impact on employees of the increased fringe benefit tax on company cars is likely to be small, as most employees currently receive car allowances as opposed to company cars, says National Treasury spokesperson Lindani Mbunyuza.
However, individuals that make use of company cars primarily for private use will face a higher tax burden. If this is the predominant case in most instances, tax revenue is likely to increase, if not, tax revenue might be neutral, says Mbunyuza.
“As announced in the Budget, the fringe benefit tax on company cars will be increased to ensure that company cars are not abused, following the scrapping of deemed business kilometres for car allowances from this tax year,” she says.
In the new system, employees making use of a company car will be able to deduct related actual business travel kilo- metres from their taxable income expenses at the end of the tax year, she says. The business kilometres that are travelled must be documented in a logbook and be retained as proof in order to claim for travel expenses. The South African Revenue Service (Sars) reported that the vehicle’s opening and closing mileage for each tax year must be recorded, from March 1 to the last day of the following February. The same applies to those using their personal vehicles for business.
Sars also reported that the portion of the monthly travel allowance that will be taxed upfront and be subject to ‘pay as you earn’ will increase from 60% to 80%.
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