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Car vs car allowance tax

StrawberryPop says:
6 April 2022 at 8:04

From a tax perspective which is more beneficial to an employee: a car allowance or a company provided vehicle? What would the impact be on either if the employee does not travel sufficient business kilometres on both?

TaxTim TaxTim says:
6 April 2022 at 10:39

It would depend on the car that is being offered and the value of it versus the amount of the travel allowance you are being offered.

Company Cars are taxed at a certain rate and subject to a specific formula. However, this can become very costly to you from a tax point of view. However, then the wear and tear that you would suffer on your personal car don't apply. As a general rule, 80% of your travel allowance is subject to monthly PAYE. This is based on the assumption that you spend 80% of your travel time for personal reasons and only 20% for business. In the event that you travel significantly more for business, your employer may opt to only tax you 20%, where the usual taxing is 80%, as explained above. It is, however, up to you to submit your actual mileage in a detailed travel logbook to SARS at the end of the year. If you fail to submit a valid logbook, you will end up owing the taxman when you submit your return. This is the result of 100% of your travel allowance being taxed, which means that you will be obligated to pay tax on the remaining 20% (assuming 80% was subject to PAYE), which was not taxed throughout the year. Please see our Travel guide blog for more information on what details must be available on your logbook to be seen as a qualifying logbook. You can also have a look at our Travel allowance calculator to assist you in Compare Actual Costs and Deemed Costs for the Maximum Tax Deduction.

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