Payroll taxes - Allowances/Fringe benefits and treatment thereof...

[J7J]

Hi,

I have a few questions on Allowances / Fringe benefits and how they should be treated on the payroll and also for PAYE.

1) Fuel allowance: If an employee's fuel, services, etc is reimbursed in full (ie. either fills up with a card or gets reimbursed the full amount that was spent on fuel etc.) - Do you put only the personal use portion on his payslip and then he will be taxed on this personal use only? Or do you put the full amount on the payslip and then he will be taxed on the personal and business use (sounds unfair to do it like this).

2) Company Car Fringe Benefit: If an employee uses a company car and is reimbursed for his fuel, services etc. in full as well, is it only the Company Car Fringe Benefit that must be put on the payslip (ie. it includes the fuel, etc in the percentage that is applied to the car's value)? So you won't have a fuel allowance and a Company Car Fringe Benefit if the employee uses only one company car and the fuel relates to this company car?

3) Cellphone allowance: If an employee has a cellphone that is paid by the company in full (business and personal calls) - do you only put the personal portion on the payslip and he will be taxed on this portion only or do you put the full amount on the payslip and he will be taxed on the full amount?

Do you put the above allowance on the payslip including or excluding VAT (if the employer is a registered VAT vendor)?

Your advice will be appreciated. Thank you very much in advance.

[Dave A]

On the cellphones, see the attached file. It's a draft guide from SARS released for comment, but probably pretty close to the final version as there was already a round of comments which were taken into account before this release.

The significant point of principle is 4.1.1.

Essentially if the company is being billed for the account and majority of the use is for business purposes, there is no deemed fringe benefit accruing against the employee.

[J7J]

Thank you very much, Dave. I was not aware of this Draft Interpretation Note.

[Mynhardt]

I have fallen out of touch with the changes to travel allowances and right of use of motor vehicle fringe benefits.
So I will only link to the relevant resources, with which you can answer your question.

Interpretation note 72 explains the fringe benefit for the right of use of motor vehicles and travel allowances.

Allowances, advances and reimbursements (including reimbursive and fixed travel allowances) are addressed in interpretation note 14
For your questions whether it is just the right of use fringe benefit, or the fuel allowance as well, you need to distinguish between a reimbursive allowance and a travel allowance.
Have a look at the following link which explains the difference: http://www.sars.gov.za/FAQs/Pages/70.aspx

With your right of use of a motor vehicle fringe benefit, the fringe benefit can be reduced by costs bourne by the employee if the employee bears 100% of the relevant costs.
If the employee receives a fixed travel allowance in addition to the right of use, both will be a fringe benefit and be taxable!
See example 11 of interpretation note 72.

For PAYE purposes:
80% or 20% (depending on the percentage business use/travel) of the fixed travel allowance and right of use of motor vehicle fringe benefit is included when calculating PAYE.
This does not mean that just 80% or 20% will be taxable, but rather that the employee only make prepayments based on 80% or 20% of the estimated tax value of these benefits. The final taxable amount will be determined at year on when the employee does his tax return.

For future reference where you can get all the acts, interpretation notes, practice notes, etc. go here: http://www.sars.gov.za/Legal/Pages/default.aspx

Hope it helps

[J7J]

Thank you very much, Mynhardt. This is so helpful!