Is your personal use of your company's voyager miles a taxable fringe benefit?
Are you a business executive with lots of business voyager miles? Are you thinking about using them to take your family on holiday?
You need to read this before you go ahead and use them.
Using your business miles might constitute a taxable fringe benefit, especially if these miles are accrued to the company credit card?
Let's look at two examples to see if it is a taxable fringe benefit or not...
13 Taxable fringe benefits - are you taking advantage of all of them?
There are hundreds of companies out there that don't know which fringe benefits are taxable or they land up taxing the wrong percentage on them...
This kind of error could cost you thousands in penalties to SARS if it catches you out – and it will!
Find out how to make sure every time you offer a fringe benefit to your employees you'll know if it's taxable or not and how to tax it correctly.
One instance when your personal travel isn't a taxable fringe benefit
Let's say you travel all over the world, on business trips for your company. You use the company credit card to cover travel costs and expenses.
Because you're such a frequent flyer, you've accumulated enough free miles on the credit card to cover the costs of a free return airline ticket to an international destination. Your company lets you use the free ticket for your private use. The market value of the airline ticket is R8 000. Do you have to pay tax on the benefit received? And must your company account for this as a fringe benefit?
Seeing as the air ticket is for your private use, and your company gives it to you for free because you earned it with air miles, plus, it won't cost your business a cent, your ticket doesn't constitute a taxable fringe benefit.
Let's look at another example, with a different outcome…
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One instance when your personal travel is a taxable fringe benefit
Assume the same facts as the above example, except you choose to redeem the voyager miles for personal holiday accommodation at the SunFun Lodge in Mauritius. You plan to stay there for five days, which is normally priced at R1 000 per person, per day. You'll cover all air travel, food and incidental costs.
In this case, the accommodation is cheaper than the value of the air miles so this DOES give rise to a taxable fringe benefit, because the accommodation isn't free. The plane ticket was free.
Your company must calculate the value of the fringe benefit according to the normal everyday pricing of the accommodation. So because you're staying for five days, a total of R5 000 (i.e. 5 x R1 000) must be included in your remuneration for employees' tax purposes, during the month you take up the accommodation in Mauritius.
SARS is always sneaking in new fringe benefits and changing the way you tax the old ones. The practical Tax Handbook keeps you up to date with these changes. Claim your copy here if you don't have a copy of the handbook.