Employment benefits

Tax 327
2021
Cash Salary • Money

Allowances • S8(1)

Fringe
benefits • 7th schedule
Assets or • Para (1)
right of use

Equity shares
Tax Framework
 Allowances , Advances & Reimbursements

• Included in TAXABLE INCOME i.t.o s8(1)(a)

• Allowance – an amount granted to an

employee by employer to incur a business
related expenditure – with no obligation by
employee to account on business related
expenditure
Allowances , Advances & Reimbursements

• Advance –an amount granted to an employee

by employer to incur a business related
expenditure – with an obligation by employee
to account on business related expenditure.
Employer recovers difference from employee.
Allowances , Advances & Reimbursements

• Reimbursement - employer reimburses an employee

for actual business related expenses incurred after
the employee incurred the expense and provided
proof to the employer of the amounts spent.

• s8(1)(a)(iv) – any allowances or advances pd to government

employees stationed outside SA or persons rendering services to
persons in public service excluded from provisions of s 8(1) if
services rendered outside SA.
 Reimbursements and Advances
Exclusion from taxable income – reimbursements and
•
advances
Section 8(1)(a)(ii) excludes reimbursements or advances
from taxable income if –
– the reimbursement or advance was or must be expended by
the recipient on instruction of the principal in the furtherance
of the principal’s trade;
•

– the recipient must produce proof to the principal that the

amounts were wholly and actually expended for this purpose;
•

– the expenditure was or will be incurred to acquire any asset

and ownership in that asset vests in the principal.
 Specific Allowances / advances
• S8(1)(a)(i)(aa) – (cc)

• A NET Amount is included in taxable income in

the case of a travel, subsistence of holder of
office allowance.

• Only expenses as per s8(1) (b- d) allowed as

deductions against the allowance.
Travel Allowances – s 8(1)(a)(i)(aa) and s 8(1)
(b)

2 Types of Travel Allowances:

• Fixed travel allowance : fixed monthly amount
irrespective of km’s travelled by employee in
any motor car.
 Travel Allowances – s 8(1)(a)(i)(aa) and s
8(1)(b)
• Reimbursive travel allowance : distance
travelled and then reimbursed by employer on
an employer- agreed rate per km based on
actual business km’s travelled.
 Travel Allowances – s 8(1)(a)(i)(aa) and s
8(1)(b)
• NB – where employer simply reimburses
emloyee for actual cost incurred in travelling
for business purposes – not travel allowance ,
simple reimbursement.
 Fixed travel allowance method
• Only include portion related to private travel –
because that is for own benefit.

• So how do we do that
2 ways to do it:

1. Actual business km’s x deemed rate per km

2. Actual business km’s x actual rate per km
 Fixed Travel Allowances
• Actual business km’s X deemed rate per km
 Fixed Travel Allowances

Fuel cost component:

• NB – BGR 23
• Employee must bear full cost of fuel
• When employee uses the company garage card, regarded as
being expended by employee if included in travel allowance.
Maintenance cost
• Even if vehicle purchased with maintenance plan – and
recipient acquires add on plan can include maintenance cost
component.
Can only include fuel and maintenance cost where the full cost
borne by recipient.
 Fixed Travel Allowances
2. Actual km’s X Actual rate per km

Actual EXPENSES [s8(1)(b)(iii)]

•Leased vehicle: total payments limited to fixed costs (use Table)

• Own vehicle: calculate wear-and-tear over 7 yrs;

cost of vehicle limited to R595 000 (for 2019) and finance
charges calculated on debt (which is limited to R595 000)

Actual km [s8(1)(b)(iii)]
- Must prove how many kilometres (odometer readings)
- Private km includes distance between home and work
- Only business km used here
 Travel Allowances
• S 8(1)(b)(iii) - where accurate record of
distance travelled is kept the deemed rate per
the table it is used to determine the allowed
deduction against travel allowance UNLESS
the contrary appears……..

• This implies that where accurate record of expenses is

kept, the taxpayer is allowed to determine which rate
actual or deemed provides the biggest deduction against
the allowance.
 Reimbursive Travel allowance
• When recipient receives an amount based on the
actual distance travelled @ employer agreed rate
then it’s a reimbursive allowance.

• The deductible expense can be based on

• deemed rate per the table
• Actual cost if record kept ; OR
• Simplified method( where actual business
km’s used as stated in s8(1)(b)(iii) and no other
travel allow or reimbursement is received, then
simplified rate of R 3.61 can be used.
 CHANGE
NB :
• Any excess portion of reimbursive allowance will be
remuneration.

• EXCESS portion : difference between rate paid by

employer and simplified rate X actual km’s
travelled.
• Because it forms part of remuneration, must be
done on a monthly basis and employees tax
charged.
 Reimbursive Travel allowance

• A recipient who receives a fixed travel allowance and

a reimbursive travel allowance - must add the
amounts together and treat as a travel allowance.

• In this instance the simplified method cannot be

used.
 Anti - avoidance
• S8(1)(b)(iv) – aimed at employee letting vehicle to
employer and then getting right of use thereto, as a
Fringe benefit.
In this instance –
• Rental paid and cost incurred by employer deemed
to be a travel allowance paid to employee.
• Rental income deemed NOT to have been received
by employee and no cost allowed as deductions
• Deemed that employee DID NOT receive right of use
of vehicle ( therefore no FB), so travel allowance
calculated not right of use
 SUBSISTENCE ALLOWANCE
Granted by most employers to employees , wrt:
• Accommodation, meals or other incidental cost
Where the employee spends at least 1 night away from his usual
place of residence in RSA on an ad hoc basis
• Not an amount that forms part of the employees remuneration
structure.
Taxable portion : Allowance - business costs
Actual expenses allowed as a deduction if proof supplied .
If no accurate record kept: Deemed rates as published in the GG can
be claimed for meals and incidental cost used for each day or part of
a day away from home.
For accommodation only actual costs can be claimed no deemed
rates.
Deduction can never exceed the allowance provided
 SUBSISTENCE ALLOWANCE

• Local:
incidental cost only – R 139
incidental and meals – R 452

• Travel abroad - daily rates provided per the table