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Thinking of investing in a company car? Here's what you must know

by , 09 May 2014
You may feel like you're paying too much tax sometimes and it's driving you insane. But there's one life saving business tax deduction on a company car you could use to ease the tax burden. But before you rush off to buy your company a new set of wheels there's some things you should know. Read on for more about owning a company car and getting it business tax deduction ...

If you know the difference between a company car and a travel allowance you can save thousands. 

One life saving company car business tax deduction 

The Practical tax Loose Leaf says company cars are one of the most common business tax deductions.
This is why it's one you must make sure you don't forget about. Here's what you need to remember.
The car belongs to the company and because of this you're responsible for the costs of insurance, financing, maintenance and fuel in full. You need to make sure you've included all of this in your company car policy.
But, you tax your employee on his private use of the car. 
As the car depreciates you can try claim a tax deduction on the wear and tear of the car. SARS actually gives you a wear and tear allowance on assets. So as the car gets old you can reduce the tax even more.
When considering your company car deductions you must also remember accidents, maintenance and kilometres travelled. These affect the tax you'll pay as well.
We've actually said before that if the employee uses the car a lot, it can be very cost effective. 
But you have to make sure you don't get your company car allowance confused with another four-wheel allowance...

12 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.

How is travel allowance different from a company car allowance?

Travel allowances are very different because then the car belongs to the employee. You're just compensating them for using the car for business. 
With a company car the tax returns are in your hands. With a travel allowance you have to make sure that your employee's log book is up to scratch otherwise it might not be a deduction from your small business tax.
Both of these are tax deductible expenses they just work in very different ways. 
Keep them both in mind and consider the ins and outs of owning a company car before you go buy one.

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