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Does "Gross salary" for PAYE include subsistence allowances, car allowances etc?

Posted 21 September 2013 under Tax Q&A


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What components make up "Gross salary"? Would things like subsistence allowances (local) and car allowances be included?

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TaxTim TaxTim says:
21 September 2013 at 2:15

Gross income is all amounts received or earned not of a capital nature, so would include allowances, but not the sale of a home.

Sunshine says:
21 September 2013 at 2:29

Sorry, I think I used the wrong term... To reword the questions... When calculating an employees PAYE, what amount is the calculation based on? Would it include subsistence allowances and car allowances?

TaxTim TaxTim says:
23 September 2013 at 9:02

Yes you would include car allowances - travel capped at 80% and employer provided vehicle at the full amount and subsistence allowances greater than the daily allowance.

PAYE is calculated on what is called Net Remuneration which is the total of all taxable portions of the cost to company of an employee. This includes company perks like medical aid paid by the employer and bonuses.

Sunshine says:
23 September 2013 at 11:50

Thanks. I think there is something in the Act that says if the employer is satisfied that only 20% of a company car is used for private use then only 20% needs to be included in calculating PAYE. So for example, if the car has a cash price of R100,000, does that mean the amount that will reflect on the employees IRP5 (I'm not sure off hand what the exact code is for right of use of motor vehicle allowance is) at the end of the year will be R100,000 * 0.035 * 20% * 12 months? Or is the amount to reflect under the allowance code R100,000 *0.035 * 12 mths?

TaxTim TaxTim says:
23 September 2013 at 12:06

The 20% rule applies to travel allowances whereas you speak of car allowances. Are you referring to a travel allowance or the right to use a car owned by the employee?

Sunshine says:
23 September 2013 at 14:56

Right of use of motor vehicle when vehicle owned by the employer

TaxTim TaxTim says:
25 September 2013 at 8:36

With a Right of use of motor vehicle then there is a set formula as you have shown above, but there is not personal/private use split like travel allowances for 80/20. The source code is 3802. The difference is that the right to use a vehicle is seen as a fringe benefit and a traveling allowance is an allowance which have different tax treatments.

TaxTim TaxTim says:
25 September 2013 at 8:46

Apologies, but we have done some further checking and the 80/20 rule does also apply here.


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