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How to turn R1 into R6 200 tax savings in 2016

by , 01 December 2015
Not many people think of looking at the tax tables when they purchase their company car.

But if you did, you could turn R1 into a R6 200 tax saving.

Here's how...

Every single South African company must have a Promotion of Access to Information (PAIA) manual by 31 December this year…

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How spending just R1 more on your car can save you R6 200 in tax per year!
Let's look at an example:
Let's say Tim Jones earns a gross salary of R700 000 per year. Structured into this is a travel allowance of R80 000 for the 2015 tax year. His car originally cost him R240 000. He travelled 21 000 km during the year. Of this, 16 000 were business kilometres based on his accurate logbook. Tim hasn't kept any records of actual costs – only of his business km.
Using the formula above and the prescribed rates set by SARS, he calculates how much he spent on his business kilometres for the year:
Fixed cost =          R66 530      x           100 = 316.80cents
21 000
Fuel cost = 112.0 cents
Maintenance = 38.1  cents
TOTAL = 466.9 cents/km (or R4.669).
Since he travelled 16 000km for business, the total amount he can deduct for business travel for the 2015 tax year is 466.9 x 16 000km / 100 = R74 704.
We've calculated that he qualified for a deduction of R74 704, or saved roughly R29 881 in tax for the year at 40% tax rate.
But what if his car cost him R240 001 instead of R240 000, only a R1 difference?
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At a cost of R240 001, the table above will result in the following calculation:
Fixed cost =          R84 351      x           100 =  401.67 cents
21 000
Fuel cost = 120.5 cents
Maintenance = 41.6  cents
TOTAL = 563.77 cents/km (or R5.6377).
Tom's deduction would therefore be R5.6377 x 16 000 = R90 203. This is R36 081 tax saved at 40% tax rate.
That R1 difference in the cost of Tim's car just saved him an extra R36 081 – R29 881 = R6 200 in tax!
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