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Car vs car allowance tax

Posted 16 February 2016 under Tax Q&A


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StrawberryPop says:
14 February 2016 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?

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TaxTim TaxTim says:
16 February 2016 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 doesn't apply.

A travel allowance is taxable in your hands at 80% of the value, but you can deduct the business mileage that you travel as well as other costs. However, you then have the issue of wear and tear of your car. You would also need to keep a logbook to justify your business mileage claim.

If you are travelling less than 8000kms for business a year, it is often simpler to be reimbursed by your employer for your mileage at the SARS rate which is currently R3,18 per km. This would be tax free in your hands and there is also no need to keep a logbook.


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