Financial support for Domestic worker

[julian@marcorpsa.com]

Our domestic worker's husband is divorcing her. We have been helping her with this process as she is at a disadvantage in the proceedings. During the process we found that the husband had been drawing on their Access bond - leaving her with a large mortgage to settle. She is fighting him in court over this to get the money back.

She cannot fund this on her salary so we have been helping out through our company.

My question is this something that can be claimed from a tax perspective and if so how?

Appreciate any advice.

[Francois_za]

Hi Julian,

This is capital of nature, the money that goes out will be against a loan account, this however can be written off, there is CGT applicable when writing off loans, since the amount is being paid from the business you can issue that to a loan and when you believe with certainty this amount is irrecoverable, write off the loan,

The write-off will be added back for tax on the tax comp and added to CGT at 80%, from a tax perspective you can pay her for the business cleaning services and as an arrangement take this from the loan account and pay the loan off, this will enable you to increase expenses

1. 20%
2. Utilise future payments against loan

Kind regards
Francois

[julian@marcorpsa.com]

Hi Julian,

This is capital of nature, the money that goes out will be against a loan account, this however can be written off, there is CGT applicable when writing off loans, since the amount is being paid from the business you can issue that to a loan and when you believe with certainty this amount is irrecoverable, write off the loan,

The write-off will be added back for tax on the tax comp and added to CGT at 80%, from a tax perspective you can pay her for the business cleaning services and as an arrangement take this from the loan account and pay the loan off, this will enable you to increase expenses

1. 20%
2. Utilise future payments against loan

Kind regards
Francois

Thank you Francois for the detailed replay, I forgot to mention that she is employed by the business - does that alter the equation at all?

[Francois_za]

Hi Julian,

It will just be a staff loan then, no difference, the amount is also probably immaterial to the financials thus no subordination is required. Loans can be complex depending on the circumstances, but in general small loans do not tend to create issues

Kind regards
Francois

[dellatjie]

Just a side note here: if the loan is more than R10000, and you don’t charge interest, a fringe benefit must be shown on her payslip equal to the interest that should have been charged per SARS’s tables.


Sent from my iPhone using Tapatalk

[julian@marcorpsa.com]

Just a side note here: if the loan is more than R10000, and you don’t charge interest, a fringe benefit must be shown on her payslip equal to the interest that should have been charged per SARS’s tables.

Thank you again - appreciate your time and input.