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When trying to decide between a company car and a travel allowance consider how much your employee travels

by , 04 July 2014
A company car is an asset your company's responsible for. The tax on it is simple to work out but you have to pay for insurance and maintenance.

A travel allowance, on the other hand, is less expensive for your company because you don't have to pay for the car's upkeep. Things do get complicated if you want to change or remove it.

There's so much to consider when you want to choose between these two options.

And while we don't want to complicate the decision anymore, there's one more thing you must think about before making a decision...

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Does your employee travel A LOT for business? 

 
If your employee's always on the road, it's very important to consider this in your decision. 
 
The Practical Tax Loose Leaf Service says part of this consideration is how his travel affects maintenance costs, insurance and accident risks. 
 
Despite this, a company car is usually the best way forward if your employee's always on the road. This is especially true if the car is light on fuel. 
 
You must just ensure your employee records all his travels accurately - even all his private use of the car - because this is what you work out his fringe benefit tax on.
 
But what if he doesn't travel a lot?
 

If your employee only travels five times a month, a travel allowance is a better idea

 
If your employee doesn't travel for business much it's not really necessary to give him a whole car. Rather just cover the cost of when he does travel. 
 
If he really doesn't travel much, the reimbursement travel allowance is the best method. This way, you only pay your employee back for his travel expenses. Just ensure he keeps a logbook of all of his travels or SARS may want to investigate.
 
With that one extra point to consider, we hope making your decision will be just a little bit easier to make. 
 
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