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Four company car rules guaranteed to save you thousands

by , 13 May 2014
Are you 100% clear on how you can shrink your company car tax bill?

If not, then spend two minutes reading this. I guarantee you'll save thousands off your company car tax bill.

Stick to these four company car tax rules to make sure you calculate your saving correctly. Let's have a look...

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Four company car tax rules
1. You tax private use only!
This is any travelling you do that's not for business purposes. This includes the trip between home (place of residence) and the office or the place of employment. If you work from home, then all your travel to clients is considered business travel. 
2. You tax this perk at 3.5% of the car's determined value each month
The determined value is the original cash cost of the car including Vat, but excluding finance charges or interest. It includes the cost of the maintenance plan, if the car was under this maintenance plan when you bought it.
The car's determined value includes the cost of any original accessories (e.g. electric windows or fancy mag wheels). If accessories are added later, you must tax the employee on these added extras. 
This doesn't hold true for security or anti-hijack systems. If the cost of installation is separately identifiable when you're buying the car, then exclude these costs from the car's determined value. 
You don't tax the employee on these costs. 
If your employee has more than one company car, you must calculate the determined value on the car with the higher value of private use. This is unless SARS stipulates that you have to use some other figure. Keep in mind that SARS must be satisfied that each car was indeed used by your employee for business purposes. 
Let's look at the other two rules you need to stick to. 
The company car. An employee's favourite perk. An accountant's little time bomb.
Spending time trying to calculate all the variables of company cars vs. travel allowances can be frustrating not to mention complicated. 
Well, you don't have to pull your hair out anymore. Here are 14 practical examples to make your travel calculations in minutes.
3. Now you tax the employee on 80% of this perk, for PAYE
4. No logbook, no claim
SARS has made it clear that without a logbook to substantiate your tax deduction, you can't claim it. You can't reduce the amount subject to employee's tax by the business kilometers travelled unless the business kilometers represents more than 80% of the total usage of the vehicle. 
Until next time
Natalie Cousens
PS: Make it a compulsory company policy that your staff keep accurate logbooks if they make use of the company car. Download a sample template of the SARS approved here.

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