Filling out your tax return can be stressful, but we've got a simple tip that could give you a big chunk of your taxes back!
And it all has to do with a great business perk: A company car.
Do you qualify for this company car tax break?
Is the car available to you and your colleagues in general? (Such as a pool car)
Do you use the car infrequently for personal use?
Is the car usually kept away from your home when it's not in use?
Does your job entail you regularly using the car outside normal business hours?
Have you kept an accurate logbook throughout the year?
If you answered 'yes' to all these questions, your personal use of the car may be deemed to have no value. That's good news when you're filling out your tax return!
Tax Returns Made Simple: how to complete your own tax return
shows you how this tax break works with this example:
Joe has access to a company car, which he uses for both personal and business travel. He is diligent about keeping an accurate logbook.
Out of the 24 000 km he travels during the year, 18 000 km is for business reasons. (This means 75% of Joe's company car use was for business reasons, and 25% was for private use.)
His company vehicle is valued at R250 000.
On his IRP5, the company car fringe benefit (code 3802) for the year is R105 000, of which 80% was taxed by Joe's employer.
Joe can reduce his code 3802 fringe benefit by applying this formula…
Value of fringe benefit = R105 000 (only 80% of this was taxed by employer)
Business travel: R105 000 x (18 000/24 000) = R78 750
Taxable value of fringe benefit: R105 000 – 78 750 = R26 000
Basically, Joe had already been taxed on R84 000 by his employer (as this was 80% of his company car benefit), but he is only liable to pay tax on R26 000.
Since Joe has kept an accurate log book, and can prove that only 25% of the kilometres travelled in the company car were for private use, his employer has overtaxed him because he assumed that 80% of Joe's company car use was private.
That means Joe will be getting a refund on his taxes, and so can you!
If you have more questions on company car tax allowances, have a look here...