My question is how to structure your ctc package for tax purposes, for example my employers has only the following guidelines Ctc=657 918 per annum. 70% must be taken as salary , the remaining 30% may be structured in a tax efficient manner. I'd like to add a car allowance, as well as a bonus 13th cheque to the value of +- 25 000, and I'd like the company to contribute 12% of package as pension. What should I also consider for tax purposes
Will you be travelling for business purposes and approx. how many km's per year? Do they offer a medical aid benefit?
Leeu34says: 26 October 2015 at 9:40
Yes I will be traveling between 800-1000 km per month, but it can vairy according to the amount of clients, medical benefit is offered with the company contributing R1014 per month
TaxTimsays: 26 October 2015 at 18:28
I assume you will be using your own car for business travel. Since it sounds like you do travel for business purposes, then it would be good to include a car allowance in your total package. This is because only 80% of the car allowance is subject to monthly PAYE. However, do bear in mind that travel from your home to your office is not considered business travel and you won't be able to include this in your travel claim. You need to keep a logbook where you record all your business km's travelled to back-up your travel claim against your travel allowance on your tax return.
SARS will look at the amount of your Travel allowance to make sure it looks reasonable compared to the value of your car as well as the business km's you travel. You are probably safe in structuring your allowance so that the after-tax amount covers your monthly instalment, fuel, maintenance, and insurance.
If you find you are travelling less than 8000 km's per year, then it would be simpler to claim a re-imbursive travel claim at the SARS rate which is currently set at R3.18 per km. This would be instead of the travel allowance. You would then submit a travel claim to your company based on actual km's travelled and the business would actually pay you back R3.18 per km which is supposed to cover petrol and maintenance. You would not need to keep a logbook here which is a whole lot simpler.
Your 13th cheque will be taxed in the same way as your normal salary.