The Seventh Schedule of the Income Tax Act provides for the value of certain non-cash benefits received by virtue of employment to be subject to PAYE on a monthly basis. Depending on the type of benefit in question, the valuation thereof may be subject to a formula calculation, such as housing benefits.

The valuation methods in the Seventh Schedule to the Income Tax Act do not always correlate to the actual cost of the benefit which in many instances can be objectively determined by an employer. Treasury has proposed where possible and practical, an employer would be allowed to use actual costs to determine the value of a fringe benefit. This is an attempt to create a better match between the deduction of employee's tax and the tax calculation on assessment. Caution is necessary on this proposal, as actual costs may in fact push up the value of fringe benefits in certain cases.

Written by Ruaan van Eeden, Tax Director, Cliffe Dekker Hofmeyr