HomeHome SearchSearch MenuMenu Our productsOur products

Depreciation: The deciding factor between a company car and a travel allowance

by , 04 July 2014
There's always a big debate when it comes to company car and travel allowances. Everyone wants to know which one's better and, particularly, which one will save them money.

The truth is, the answer depends on you and your company. There are lots of different factors that can affect this decision.

One of the questions you must ask yourself is: Do you want to have to manage the car yourself? If you do, then a company car's the better way to go. But you have to remember to include depreciation into that equation...

*********** Reader's choice  ***************
Put a stop to all your company car and travel allowance headaches today with this one tool
 
Get the answers to your biggest company car and travel allowance questions right now and avoid being hunted down by SARS for making costly mistakes.
 
***************************************
 

Your company car's value will depreciate every year

 
We discussed before how your company car's value decreases by 15% each and every year. So if the car is worth R200 000, next year it'll be worth 15% less or R170 000.
 
The good news here is, as the car's value drops, so does the amount of tax your company pays on it. Eventually, the book value will drop to nil and you'll pay no tax
 
But your company might not want to spend money on a depreciating asset at all. In this case, a travel allowance may be a better option. 
 

Depreciation doesn't affect you if you offer a travel allowance

 
With a travel allowance, your employee will use his own car to travel. You then simply give him an amount each month to cover his costs or reimburse him for all his travel expenses
 
In this situation, the depreciation of the car has no impact on you. You're paying for the travel expenses and not your employee's car itself, so its value is irrelevant.
 
So take this into consideration before you decide which option is 'better' for your company.
 


Related articles




Related articles



Related Products



Comments
0 comments


Recommended for You 

  Quick Tax Solutions for Busy Taxpayers – 35 tax answers at a glance



Here are all the most interesting, thought-provoking and common tax questions
asked by our subscribers over the last tax year – everything from A to Z!

To download Quick Tax Solutions for Busy Taxpayers – 35 tax answers at a glance click here now >>>
  Employees always sick? How to stop it today



Make sure you develop a leave policy to regulate sick leave in your company.

BONUS! You'll find an example of the leave policy and procedure in this report.

To download Employees always sick? How to stop it today click here now >>>
  Absenteeism: Little known ways to reduce absenteeism



This FREE e-report will tell you how you can reduce absenteeism in your workplace while avoiding the CCMA and without infringing your employees' labour rights.

To download Absenteeism: Little known ways to reduce absenteeism click here now >>>
  7 Health & safety strategies to save you thousands



Don't let a health and safety incident cost you one more cent. Implement these seven
strategies in your company today.

To download 7 Health & safety strategies to save you thousands click here now >>>