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Confused about what classifies as private company car use? These three examples will help

by , 03 October 2014
If you give your employee a company car to use, he must pay fringe benefit tax on it. The good news is he only needs to pay tax on his private use of the car.

Now there's some confusion around what might count as private use.

To help with this we have three examples of private company car usage. These are three of the most common private usages.

Read on to find out what they are...

 

Three common examples of private company car usage

 
Example 1: Using the company car to pick up his kids
 
If your employee uses the car in his lunch break to go pick up his children from school, for example, this is private use. 
 
This trip has nothing to do with work and because he's using the car during his off time, it means he's using the car in his private capacity. 
 
Your employee must record the kilometres he drives going to and from school  or picking up any relative or friends in his logbook.
 
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Example 2: Driving home at the end of the day
 
Let's say, your employee's a sales representative and he drives from client to client all day. At the end of the day, if he uses the company car to drive home it's private use. At this time, he's off duty and his journey has nothing to do with his work.
 
If he brings the car back to the office first and then, for example, takes the bus home, he could argue that the drive back was business related.
 
Example 3: Going to buy food during lunch time
 
If your employee takes a drive to buy food for lunch it's definitely private even if it's during business hours. 
 
Now that you know if your employee uses the car for any of these purposes, it's private usage and he must pay fringe benefit tax on it. 

 
PS. Here are 47 things you never knew about allowances and deductions that can put money back in your pocket... There's nothing better than getting money back from SARS.


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