Salary and car allowance question

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Kloofvreter

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Let's say, for example, I earn a salary of R20k per month before tax. R4k of that is structured as a car allowance. Will I get more out after tax with or without a car allowance, or does it not really make a difference?
 
You will pay tax on 18k instead of 20k. So you will pay less tax. Now days is not really worth it because SARS makes you jump through hoops and you need to keep a log book. Also there is a max persentage of your salary that you can have as travel allowance
 
Nerfherder said:
You will pay tax on 18k instead of 20k. So you will pay less tax. Now days is not really worth it because SARS makes you jump through hoops and you need to keep a log book. Also there is a max persentage of your salary that you can have as travel allowance
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Depends on your marginal tax rate I suppose, but the 5min a day of completing logbook entries is definitely worth the several thousand per month I save in taxes.
 
Buy an electronic logbook. Makes life so much easier... They plug into your cigarette lighter / laptop and they store trip data for months... if not more.
 
Thanks for the replies. The logging of kilometers is not an issue, just wanted to find out about the taxing.
 
Just remember driving from home to work and back does not count as claimable kilometers. You have to travel from your office to clients to claim.
 
hsmnel said:
Just remember driving from home to work and back does not count as claimable kilometers. You have to travel from your office to clients to claim.
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Correct. Office to Home and Home to Office counts as private. I've been claiming for years, just wondered if there is actually a benefit in having my salary structured.
 
You do save if that allowance is on a vehicle payment and you have a log book. If not you will be taxed more on the allowance as it's no longer a company benefit but an additional income if you will.
 
Pitbull said:
You do save if that allowance is on a vehicle payment and you have a log book. If not you will be taxed more on the allowance as it's no longer a company benefit but an additional income if you will.
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You get taxed at marginal rate on a portion of the travel allowance. If you make use of the taxed portion for travel purposes, you get a rebate from sars when you do your return.
 
Messugga said:
You get taxed at marginal rate on a portion of the travel allowance. If you make use of the taxed portion for travel purposes, you get a rebate from sars when you do your return.
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Yes, I probably should have mentioned that. You get taxed the same anyway I think 80% of it is taxable (not 100% sure) When you submit your claims/returns you get refunded. If not it means you paid tax on 80% and get no refund.

Hope this makes sense.

Not 100% sure if it's 60% or 80% will have to go check on it.

Yes, you get taxed on 80%

see here:
Fixed travel allowances are subject to monthly employees' tax, and must also be disclosed on employees' IRP5 certificates at the end of the tax year. Although the act did not change that drastically, the portion of the travel allowance that needs to be taken into account for the purpose of calculating monthly PAYE deductions did increase from 60% of the allowance to 80%. In addition, the deeming provision against which one could claim travel expenses on assessment was removed – this means that all individuals who have a travel allowance will have to keep a logbook in order to prove their business expenses on assessment.
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60% and 15% I think, the latter being the case if in excess of 85% of your travel is business-related. Something like that.
 
Messugga said:
Going off of memory, so might be wrong as well . Don't pay too close attention to that sort of stuff.
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Nether do I that is why I googled it :o
You were pretty close though. I thought you get taxed 80% but it seems only get taxed on 80%. Not sure what rate though, you might be correct there.
 
Slootvreter said:
Correct. Office to Home and Home to Office counts as private. I've been claiming for years, just wondered if there is actually a benefit in having my salary structured.
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If you are doing the dogwork and completing the log book then yes.

My car allowance was 2k and it was saving me about R500 in tax. Was much more when my salary was 10K... but the more you earn the less it helps.

They can audit you though and if your log book is not 100% you have to pay it back.


I have been in the situation where I no longer travel for work and they were supposed to remove the structure. Every year its a problem because SARS wants 6k from me... :/

I hope its finally sorted this time.
 
Pitbull said:
Nether do I that is why I googled it :o
You were pretty close though. I thought you get taxed 80% but it seems only get taxed on 80%. Not sure what rate though, you might be correct there.
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You get taxed at your marginal rate, in other words as if it was part of your normal salary.
 
Messugga said:
You get taxed at your marginal rate, in other words as if it was part of your normal salary.
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Ok cool, now I understand that better too. Been submitting it every year and never really knew how to calculate it on my side to double check. Now I understand it better myself as well. Thanks
 
Slootvreter said:
Let's say, for example, I earn a salary of R20k per month before tax. R4k of that is structured as a car allowance. Will I get more out after tax with or without a car allowance, or does it not really make a difference?
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Your PAYE per month will be less with an allowance due to employees tax being calculated on 80% of the allowance (or even 20% of the allowance if business travel is expected to be >80%).

However your tax liability is still based on 100% of the private usage.

Messugga said:
You get taxed at marginal rate on a portion of the travel allowance. If you make use of the taxed portion for travel purposes, you get a rebate from sars when you do your return.
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Deducation, you will not get a rebate. You will get a refund if you paid more PAYE over than your tax liability.

Pitbull said:
Yes, I probably should have mentioned that. You get taxed the same anyway I think 80% of it is taxable (not 100% sure) When you submit your claims/returns you get refunded. If not it means you paid tax on 80% and get no refund.
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No, you get taxed on 100% of it.
 
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