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business usage of the car will be only 20%, so that the remaining 80% must be subjected to employees’ tax, as is also the case with travel allowances. Having said this,Warren points out that if employers are satisfied that at least 80% of the use of the car for a year of assessment will be for business purposes, then only 20% of the value of the calculated fringe benefit will be subject to PAYE. (A similar change has been made to the percentage of a travel allowance to be subjected to PAYE.) Final adjustments for actual business kilometres and private payment of expenses will occur on assessment and Warren warns that employees could find themselves having to cough up at the end of the year if their log books don’t prove business use. The challenge for businesses is that the the Act states employers must use either 20% or 80% for the whole year.“This is problematic because this does not cover situations where certain employees’ circumstances may change during the year and they move from one category to the other,” he says. “These employees would therefore be over or under taxed and would have to recover or pay the difference at the end of the tax year.” However, SARS have verbally advised that they will accept changes from 80% to 20% for a part of the year, even though the Act itself does not permit this. The new legislation also requires that if employees receive a travel allowance and they have a company car the 100% of the allowance must be subjected to PAYE, and no deductions will be permitted on assessment. Another problem which Warren says will arise, is that of some top executives driving company cars who may not want to fill in travel logs. “These executives who do not keep travel logs will end up paying tax on 100% of this fringe benefit.” “The tax assessment is based on the presumption that all employee use is deemed to be private unless the contrary is proved,” says Warren. “This presumption matches the current travel allowance rules, which require a log book to prove business use.” On assessment employees can claim certain employee paid operating expenses against the company car fringe benefit according to the specified formula.

PD 4 2011 April  
PD 4 2011 April  

Dynamics Labour relations and labour law Journal of the South African Institute of People Management April 2011 • Vol 29 No. 4...