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Here's how to shrink your fringe benefit if you bought your company car with a maintenance plan

by , 03 July 2014
A company car is a useful asset. Despite this, employers always want to find out how they can shirk the tax on it. The good news is there are several ways you can do this.

Someone people use the car's depreciation to lower the tax. Others ensure their employee uses it for business 80% of the time.

But there's another way you can do this and it all starts with buying your car with a maintenance plan...

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What exactly is a maintenance plan?

 
A maintenance plan is a form of insurance that covers general car maintenance like services and repairs on the parts.
 
It generally lasts for a set amount of time or number of kilometres. A maintenance plan is a useful way to maintain your company car. 
 
But if the cost of your company car includes a maintenance plan, it can decrease the fringe benefit tax on the car too.
 
Here's how and why your company car's maintenance plan can shrink the fringe benefit tax
 
If you have a maintenance plan, it can shrink the fringe benefit tax from 3.5% to 3.25%.
 
The reason for this is SARS allows you to claim tax deductions on expenses that help you maintain the assets you use to run your business. 
 
A maintenance plan is included as this type of expense. So instead of claiming for a deduction, it's simpler to reduce the fringe benefit amount. You'll then pay 3.25% of the car's current book value instead of the usual 3.5%.
 
So there you have it: A maintenance plan can help you look after your company car and reduce your taxable fringe benefit amount.
 
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