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How can I reduce the taxable percentage on my company car?

by , 03 November 2016
How can I reduce the taxable percentage on my company car?We recently got a question from one of our Practical Tax Handbook subscribers asking how he can reduce the taxable percentage on their company car?

This is a common question. In fact, more than 20 subscribers have asked our Tax Helpdesk the same question.

And if it's so common, I'm sure you can benefit from what Thomas Jordi, our Tax Helpdesk expert had to say.


How to make yourself invisible to SARS

The key to reducing how much tax you pay is staying off SARS' radar.

SARS has conducted R1.8 million audits. It's added 100s of new tax collectors and auditors to its payroll and each one has his own collection targets to meet.

This means two things:
  1. If you're not compliant, your chances of an audit this year have just doubled, and
  2. You will pay more in penalties.
But here's how you can make yourself invisible to SARS...


Why you must keep a log of all your travel
There is only one way SARS will let you and that's if you keep a logbook of all your travel.
So, if you pay for all the fuel used in the car during the year, SARS will reduce the deemed private portion of the company car benefit on assessment, when you submit your annual tax return.
To qualify for this reduction, you must keep a log of all your private and business travel.
No logbook, no claim.
You calculate the reduction by multiplying the private kilometres you travel for the year by the rate per kilometre for fuel.
Let's take a look…


Yes! You can deduct money from negligent employees!

Picture this... Your driver Tim skips a red robot to get to your supplier before they close on Friday and collides with another car. What a mess!
This minor mishap is going to cost your company R5 000 in insurance excess and a traffic fine of R1 500!
That's a total of R6 500 you have to pay because of damages your employee caused.
But this isn't the first time Tim's cost your company money.
While you let the other time slide because he was new on the job... This time, you want him to take responsibility for his mistake and he agrees that he'll pay back the money.
After three months, you're still waiting for payment.
So how do you go about actually retrieving the R6 500 he owes you?
Let me show you...


How to further reduce your private benefit using the maintenance costs of the car
The rate per kilometre for the 2016 tax year is:

And if you pay all maintenance, you can reduce the private benefit further by multiplying the SARS' travel table maintenance costs by the private travel.
The maintenance costs for the 2016 tax year are:

Remember, a company car fringe benefit is assumed by SARS to be a 100% private benefit during the year.
So, at year end, you can reduce the benefit for those amounts you've paid for – i.e. the fuel and maintenance costs you incur for private purposes. As well as for the actual business travel you've done.
Why is this?
Because the 3.5% assumes you're getting the benefit of fuel and maintenance as well (i.e. all costs of the car).
So, it's only fair that, if you bear the costs of all the fuel and maintenance, you're not taxed on these amounts too. And SARS lets you further reduce the taxable portion of the company car fringe benefit.
P.S. If you know the difference between a company car and a travel allowance you can save thousands. Here's how

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