Company car or Car allowance?

To quote Hamlet:  “Company car or car allowance that is the question”  

(I am sure if he lived in the 21th century he would have asked it exactly like that)

This question of tax on fringe benefits is a difficult one.  Do I choose a company car or do I go for a travel allowance or should I just reimburse the KM travelled?

The most important thing that any taxpayer must remember is how important a logbook is in all 3 situations above.  I always tell my clients that the only way to prove your business kilometers is by completing a logbook.  You will feel that it is a waste of your time, but at the end of the tax year you will save money. Without a logbook no deduction is allowed.

TRAVEL ALLOWANCE    Actual Costs vs Deemed Costs

Actual costs:

Actual costs must be substantiated by a logbook as well as actual cost incurred on the vehicle.  Actual costs include the following:

  1. Fuel and Oil
  2. Repairs and Maintenance on vehicle
  3. Wear and Tear – over 7 years and cost is limited to R480 000
  4. Finance charges – limited to a cost of R 480 000
  5. Insurance on Vehicle
  6. Car tracker
  7. Finance Lease payments – limited to a cost of R 480 000

Deemed Costs: Below are the new rates for calculating the travel allowance for your vehicle

Value of the car Fixed cost Fuel cost Maintenance Cost
R (including VAT) Rand per annum Cents per km Cents per km

0 – 60 000




60 001 – 120 000




120 001 – 180 000




180 001 – 240 000




240 001 – 300 000




300 001 – 360 000




360 001 – 420 000




420 001 – 480 000




exceeding 480 000




80% of the travelling allowance must be included in the employee’s remuneration for the purposes of calculating PAYE. The percentage is reduced to 20% if the employer is satisfied that at least 80% of the use of the motor vehicle for the tax year will be for business purposes.

No fuel cost may be claimed if the employee has not borne the full cost of fuel used in the vehicle and no maintenance cost may be claimed if the employee has not borne the full cost of maintaining the vehicle (e.g. if the vehicle is the subject of a maintenance plan).

The fixed cost must be reduced on a pro-rata basis if the vehicle is used for business purposes for less than a full year.

The actual distance travelled during a tax year and the distance travelled for business purposes substantiated by a log book are used to determine the costs which may be claimed against a travelling allowance

Reimbursive allowance

Non-Taxable reimbursive allowance was increased to R 3.24 cents per km if employee does not travel more than 8 000 km per annum

Taxable reimbursive allowance: If reimbursed more that prescribed rate or travelled more than     8 000 km per annum

Taxable reimbursive allowance does not have to be included in the employee’s remuneration for PAYE purposes.  To claim travel expenses against the taxable amount – normal travel allowance rules apply.


Employer-owned vehicles

Determined Value for fringe benefit:

  1. Cash cost incl. VAT, but excl. finance charges and interest
  2. Taxed on 3.5% per month of the determined value of the vehicle less any consideration paid by the employee towards the cost of the vehicle
  3. Reduced to 3.25% if vehicle is subject to a maintenance plan for no less than three years and/or 60 000 km

80% of the fringe benefit must be included in the employee’s remuneration for the purposes of calculating PAYE. The percentage is reduced to 20% if the employer is satisfied that 80% of the mileage will be for business purposes


No value is placed on the private use of a company owned vehicle if:

  1. It is available to and used by all employees, private use is infrequent and incidental to the business use and the vehicle is not normally kept at or near that employee’s residence when not in use outside business hours (pool car)
  2. The nature of the employee’s duties requires regular use of the vehicle for the performance of duties outside normal hours of work and private use is infrequent or incidental to business use or limited to travel between place of residence and place of work

Employer-leased vehicles

Where the vehicle is acquired by the employer under an operating lease the taxable value is the cost incurred by the employer under the operating lease plus the cost of fuel.3

This value can then be reduced for proven business use by using business kilometers travelled as a percentage of the total distance travelled.


It is always nice to get more out in a month, but at the end of the year it can cost you money.  Structure you salary package so that you can save money on tax. If you are unsure about the tax consequences of the salary package, seek advice from us your tax specialist.

Source: Janeske du Toit (Manager) from Newtons Chartered Accountants.





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IC Marais

Professional experience:

IC Marais is a certified CA (SA) with public sector and private sector technical knowledge based on 5 years’ Public Sector accounting, auditing and financial management experience and 5 years audit, tax and accounting experience. Detailed knowledge of private and public sector accounting and auditing standards (GRAP, IPSAS, IFRS, IAS, ISA) and public sector financial legislation (MFMA, etc.)

He enjoys the outdoors, hunting and fishing.


Professional experience:

In 1995, Schalk started as a trainee at Warner and Newton (which became Moores Rowland in 1997 and then Mazars Moores Rowland in 2007) in Bloemfontein. In 1998, Schalk was appointed as manager at Moores Rowland, where he became a partner in 2003. Schalk received his Postgraduate Certificate in Advanced Taxation in 2006 and in 2009 he received his Certificate in the Administration of Estates.


Professional experience:

Cedric started as a trainee at Warner and Newton (which became Moores Rowland in 1997 and Mazars Moores Rowland in 2007), Bloemfontein, in 1986. After completion of his articles, he joined the Special Investigations Division of the Department of Finance (SA Revenue Services) as a senior inspector from 1990 to 1991.


Professional experience:

Lucha started her career as a tax inspector at the Inland Revenue Department of New Zealand. After this she worked in commerce in Canada, Mexico and the United States.

On her return to South Africa, she completed her CA training contract with us and has been with Newtons ever since. She became a Partner in 2012.

Apart from her CA(SA) qualification she also holds a postgraduate certificate in Advanced Taxation (2005) and has the overall responsibility for training as our Training Officer.