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Make sure you know which fringe benefits are taxable and which aren't to avoid a 10% penalty from SARS

by , 13 February 2013
Make sure you know which fringe benefits are taxable and which aren't to avoid a 10% penalty from SARSThe new R105 minimum wage set for farmworkers is just the tip of the iceberg of what farmers will really being paying. After all, reports iAfrica.com, farmers also need to account for fringe benefits such as meals, overalls and accommodation, as part of workers' wage packet, depending on their individual circumstances and employment contracts. The same may be true in your company if you provide your employees with fringe benefits like a company car, or if you give them refreshments or loans. Here's what you need to know about fringe benefits to ensure you don't get into trouble with SARS.

'Don't be caught napping when it comes to taxable fringe benefits,' warns tax specialist Andre van Staden in the Practical Tax Guide.
 
'Before you give your employee a loan or a gold watch for his long service, you have to be aware that these could be taxable fringe benefits. This means your payroll must withhold and deduct the correct amount of employees' tax, or face penalties! And your staff will question the extra taxes on their payslips, if you haven't explained things to them clearly.'
 
Here are ten common fringe benefits you need to tax to ensure they don't attract penalties from SARS.
 
Ten common taxable fringe benefits you need to know about
 
There are ten major taxable fringe benefit categories, writes the Practical Tax Guide. These include:
 
  1. Giving your employees an asset for free (like a Smartphone), or for a price that's lower than its value – even if it's a long-standing service award;
  2. Letting your employees use assets owned by you (other than a company car);
  3. Giving your employees a company car for his private use;
  4. Offering your employees free meals, refreshments or meal vouchers – this is only applicable if the meal isn't supplied by a canteen, cafeteria or dining room operated by your company or if this is part of entertaining a client;
  5. Providing your employees with free or cheap accommodation (whether for residential or holiday purposes);
  6. Providing free or cheap services (other than medical services) for your employees;
  7. Giving your employees low interest or interest-free loans;
  8. Paying a debt on behalf of an employee;
  9. Paying medical aid contributions or medical expenses on behalf of your employees;
  10. Giving your employees' relatives some benefits – except in the case of study loans and bursaries.
 
Naturally, with each there are instances when these fringe benefits are tax-free. If you're unsure about whether you should tax your employees' benefits or not, speak to a qualified tax consultant to help you.

For more information on the tax implications of fringe benefits get your hands on the Practical Tax Loose Leaf. In the Practical Tax Loose Leaf, we've got a dedicated chapter on fringe benefits. In it you'll discover:

  • Taxable fringe benefit #1: You give your employee an asset for free (or cheap!)
  • Taxable fringe benefit #2: You give the employee the private use of any assets you own
  • Taxable fringe benefit #3: The employee gets to use the company car for private travel
  • Taxable fringe benefit #4: You provide your employees with free meals, refreshments or meal vouchers
  • Taxable fringe benefit #5: You give your employees free or cheap accommodation or holiday accommodation
  • Taxable fringe benefit #6: You provide the employee with free or cheap services
  • Taxable fringe benefit #7: You provide the employee with low interest or interest-free loans
  • Taxable fringe benefit #8: You provide employer subsidies to your employees
  • Taxable fringe benefit #9: You paid the debt on behalf of an employee
  • Taxable fringe benefit #10: Medical aid fringe benefit
  • Taxable fringe benefit #11: Medical expenses incurred F
  • Taxable fringe benefit #12: You provide benefits to employees' relatives
Get the Practical Tax Loose Leaf here...

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