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Take the fear out of fringe benefit tax with this one rule

by , 15 July 2014
When it comes to taxing your employees on their fringe benefits getting it wrong can mean a major disagreement with your employee. After all, if you over tax him by mistake, he loses out and he's just going to get cross.

And hell hath no fury like an employee who thinks you've cheated him. So you need to watch out and make sure you get his tax right.

But don't panic. As long as you follow this one rule, you'll always get it right...

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12 Taxable fringe benefits - are you taking advantage of all of them?

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This is the rule to remember when it comes to fringe benefit tax

Working out your employee's fringe benefit tax is easy so there's no need to panic. You just have to remember that the tax is always 3.5% of the benefit's current value.
Let's start by looking at its current value.
The value of a company benefit is normally whatever your company paid for it. So if you paid for your employee to go on holiday, for example, the current value is the amount you paid for it.
But with assets that depreciate, such as cars, their value changes. This means you need to get the asset valuated each year. If you don't, your employee is paying too much tax on his employee benefits.
So once you have the current value of the benefit, you need to apply the 3.5% rule.

The 3.5% rule is key when working out fringe benefit tax

Your employee's tax is also 3.5% of the benefit's value. So, let's take that holiday you paid for, for example. 
Let's say it cost R8 000 for accommodation, food, travel, money for leisure time and travel insurance. Your employee will then pay 3.5% of R8 000 (R280) as his fringe benefit tax
You simply add this amount to his usually PAYE tax.
If you stick to this rule, you'll never have to face another dispute over inflated fringe benefit tax.
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