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My employee lives on the company's premise: How do I work out his fringe benefit?

by , 26 June 2014
There are 12 fringe benefits your employees will pay tax on and providing them with free or cheap accommodation is one of them.

So there are a few things you must consider before you let your employees move in. Factors such as who'll live there? What municipal charges are there?

These can affect the amount of tax your employee will pay. But what'll happen if your employee lives in the same building your company operates in?

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If your employee lives in the same building your run the business from, he still pays tax

 
This is an interesting question the experts behind the Practical Tax Loose Leaf Service had to answer.  The question specifically said that employees lived in a house in which the business operates in. 
 
Apparently the employers used about 15% of the premise to run the business. Two employees occupied the rest of the house.
 
 
Our experts say this is definitely a taxable fringe benefit.  But how do you calculate the fringe benefit tax in this situation?
 
Here's how to calculate your employee's fringe benefit tax on the part of your business premises he lives in
 
According to the Practical Tax Loose Leaf Service, you'll use this formula to calculate your employee's tax in this situation:
 
(A –B) x (C/ 100) X (D/12)
 
A = Your employees total salary 
B = Abatement of R63 556 (SARS sets this amount) 
C = A score based on the number of rooms the house has (this won't include the rooms you use to run your business in)
D = The number of months in the tax year your employee lives in the house.
In this situation two employees, means two salaries, so let's say together they're 600 000 – R63 556. That's R536 444 which you now times by (C/100)
 
To work out C, you can take a look at the Practical Tax Loose Leaf Service. But let's say it's 19 because you pay the accommodation and electricity. 19 divided by 100 is 19%.
 
So (600 000 – 63 556) x (19/100) x 12 months = R1 246. And in this specific situation you'd divide the amount of tax by two because there are two employees living in the house. So the total tax is R623 a month.
 
So there you have it: Ensure you tax your employee correctly on this employee benefit.
 
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