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Thread: The Benefits of Not Having a Fringe Benefit

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    The Benefits of Not Having a Fringe Benefit

    I have a quick question...

    Is there any key benefits of paying for your motor vehicle in your personal capacity instead of having a fringe benefit?

    A director earned a Gross Salary of R265 000 per month, and the company paid for his motor vehicle monthly and amount of R33000 and had a net salary of R157 000 per month.

    Since, he has requested to increase his salary by the monthly cost of the vehicle so he would pay for the vehicle in his personal capacity. His new cost to company is

    Old salary R 265 000
    MV cost R 35 000
    Additional PAY to keep his net at R157 000 (PM) R 30 000

    Now, this is all fair and well, because he is also a shareholder, but I am trying to establish if there is any obvious benefit in doing this considering his net salary remained the same?

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    He owns the vehicle in his personal capacity and not through the company?

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    He would then be able to keep the vehicle for his family as a second vehicle when its time for replacement or he could sell and get the full amount after sale into his own pocket?

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    The ownership of the vehicle doesn't really matter because he is 1 of 2 shareholders. I am specifically looking at financial benefit/loss in the hands of the director and the company?

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    Hmmm only other thing I can think off he is planning on selling up his shares or leaving and wants the vehicle in his name so he can leave with it....

    Sorry cannot help more - I am sure one of the financial expert will advise better

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    It might be he is considering taking a very well paying position in some other organization but he wants a higher number on his last payslip in order to negotiate a higher wage at the new position.

    Or possibly he is in financial trouble and needs cash urgently, and is willing to default on the car payments. If the car is still technically owned by the company, the company will be on the line for the debt while the director gets to keep the money.

    I otherwise can't think of any legitimate reason to ask for this kind of arrangement, given the tax implications.

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    The ownership of the vehicle matters. If it is in the Company name then he has to pay fringe benefit tax. If it is in the director's name then he can draw a travel allowance as part of the salary.

    He would be able to claim the business portion on the fringe benefit and travel allowance with a logbook.

    It mostly depends on the individual situation, but if he has a choice then the travel allowance will be of more benefit most of the time.
    Wisdom is to do now what you will be satisfied with later

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