Any asset your company owns becomes a part of its net wealth. Of all these assets, a company car can probably be the most beneficial.
You can reap two big benefits from having a company car that you wouldn't get if you simply gave your employee a travel allowance.
So if you're having a hard time deciding between an allowance and a company car, consider these two company car benefits...
These are the two benefits of having a company car
Benefit 1: Increased net wealth
As I mentioned, a company car, like other assets, helps grow your company's net wealth. Because it's a big asset it will contribute a sizable amount to your company's overall value.
A travel allowance doesn't give you this benefit because you simply have to give your employee the money for the allowance as either an advanced or a reimbursive allowance.
This may decrease your company's net wealth instead of boosting it.
The problem is company cars depreciate in value as they get older. This is actually where the other benefit comes in.
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Get 69 solutions to the most challenging company car and travel allowance questions
If you don't know the answers to questions like:
- How often your employees should hand in their logbooks?
- If you're required to pay Vat on a company car your employee wants to buy?
- How to calculate travel allowances correctly to avoid being head hunted by SARS?
- If you can claim input tax on a vehicle you use for company purposes?
You're not only wasting unnecessary hours of time, but could also be making mistakes that SARS will hunt you down for.
Here's the second benefit you'll gain from a company car
Benefit 2: Depreciation tax deductions
As the company car's value depreciates you can claim that money off your tax bill. This means your net wealth remains level and you pay less tax. This is a massive advance that you may not get from travel allowances.
Depreciation is a much easier deduction to claim than travel allowances as SARS watches allowances very carefully.
As you can see, company cars give you more than travel allowances do. If this still isn't enough to help you make up your mind however, you can check out Your Guide to Taxing Companies Cars and Travel Allowances
. It will give you everything you need to know about company cars and travel allowances to help you make up your mind.