University of Pretoria LEARNING AREA 6: Fringe Benefits Lecture 36-37 1
Fringe Benefits Overview Lecture Topic Silke Lecture 36 Lecture 37 Intro, Allowances 11.1, 11.2, 11.3 Lecture 38 Various fringe benefits 11.4 Lecture 39 Various fringe benefits 11.4 Lecture 40 Various fringe benefits 11.4 Practical 14 Integrated question Chapter 11 2
Remember the Darren family 3
Extensive Calculation Par (i) Gross Income Fringe Benefits XXX Less Exempt income (LA6) (xxx) = Income XXX Less Deductions (e.g. s 11(a), (e), (i), Income protection contributions (xxx) = Subtotal 1 XXX Less Assessed loss carried forward from previous year (xxx) Less Pension fund contributions deduction (s 11(k)) LA5 (xxx) = Subtotal 2 XXX Less Retirement annuity fund contributions deduction (s 11(n)) LA5 (xxx) Add Taxable capital gain xxx Add Nett allowances i.t.o section 8(1) LA6 xxx = Subtotal 3 XXX Less Donations deduction (s 18A) LA5 (xxx) = Taxable Income XXX Normal tax per tax tables XXX Less Primary and secondary rebates (xxx) Less Medical tax credit (s6a and B) LA5 (xxx) 4
11.1 Learning Area 6 Allowances & advances s8(1) Fringe benefits Included in gross income par (i) Taxable income of individual Gross income Exempt income INCOME Deductions Taxable income Fringe benefits (para (i)) Allowances & advances (s8(1)) 5
Fringe Benefits Benefit SILKE Acquisition of asset @ < asset value 11.4.4 Right of use of asset (other than residential acc. or motor vehicle) 11.4.5 Right of use of motor vehicle 11.4.6 Meals & refreshments 11.4.7 Residential accommodation 11.4.8 Holiday accommodation 11.4.9 Free or cheap services 11.4.10 Low interest loans 11.4.11 Housing subsidies 11.4.12 Discharge or payment of obligation 11.4.13 Medical aid fund contributions 11.4.14 Medical expenses paid by employer 11.4.15 Benefits in respect of insurance policies 11.4.16 6
Allowances (S 8 (1)) Type SILKE Effect Reimbursive allowance 11.2 NOT included Travel allowance 11.3.1 Allowance LESS permitted expenditure included in taxable income Subsistence allowance 11.3.2 Allowance LESS permitted expenditure included in taxable income Allowances to public officers 11.3.3 Allowance LESS permitted expenditure included in taxable income 7
11.3.1 Travel Allowance 8
Travel Allowance Travel allowance received Portion of travel allowance used for business travel Portion of travel allowance included in taxable income Calculation /Reason R45 000 (R23 000) Taxable income R22 000 Business travel expenditure = Actual business km x actual costs per km Actual business km x deemed cost per km Portion of travel allowance used for private travel = taxable 9
Business Travel Expenditure Actual costs / total actual km Actual business km Deemed costs / total actual km 10
Actual Costs Vehicle owned: Wear and tear over 7 years limited to R480 000 Finance costs limited to interest on R480 000 Fuel Licensing costs Insurance Repairs and service costs Vehicle leased: Lease payments limited to the fixed cost of deemed cost price category tables - refer example on clickup Fuel Licensing costs Insurance Repairs and service costs 11
Deemed Costs Determine Value of Vehicle (INCL VAT) Determine rate per km Fixed cost/ total actual km Fuel cost if use for business purposes for less than full year - apportionment (days) (n/365) Maintenance cost 12
Deemed Cost Table 2015 Value of the vehicle (including VAT) Fixed cost Fuel cost Maintenance cost R R per annum c per km c per km 0 80 000 25 946 92.3 27.6 80 001 160 000 46 203 103.1 34.6 160 001 240 000 66 530 112.0 38.1 240 001 320 000 84 351 120.5 41.6 320 001 400 000 102 233 128.9 48.8 400 001 480 000 120 997 147.9 57.3 480 001 560 000 139 760 152.9 71.3 Exceeding 560 000 139 760 152.9 71.3 13
Example Steve bought a BMW X6 on 1 February 2014, which he also uses for business travel. Deloitte grants him a travel allowance of R192 000 per year (R16 000 x 12). He kept accurate records for the 2015 year of assessment and travelled a total of 30 000 km, of which 12 000 km was travelled for business purposes. Terms of the instalment agreement (48 Months): Cost price R526 316 VAT R 73 684 Finance charges R225 000 Total R825 000 14
Example continued Expenses actually incurred: Instalments paid (R17 187.50 x 12) R206 250 Capital R 150 000 Finance charges R 56 250 Fuel cost R 55 000 Maintenance cost R 120 000 Insurance premiums & licence fees R 14 600 Required: Calculate the taxable portion of the travel allowance to be included in Steve s taxable income for the 2015 year of assessment. 15
p.366 Reimbursive travel allowance Calculation/R eason Taxable income Reimbursive travel allowance received (Bus km x rate per km) Cost per km (actual or deemed) R45 000 (R23 000) If TP traveled <8 000 km for business purposes for year can choose R3.30 / km Portion of travel allowance included in taxable income R22 000 16
P. 369 and Example 11.4 Anti-avoidance 17
Employees Tax Reimbursive travel allowance NO employees tax deducted Fixed monthly travel allowance 80% included in remuneration OR 20% included in remuneration Effect? 18
11.3.2 Subsistence Allowance 19
Subsistence Allowance Taxable portion Subsistence allowance received = Less Portion expended for business purposes Actual Actual costs with regards to accommodation, meals and incidental costs Deemed Incidental costs R103 per day Meals and incidental costs R335 per day Travel outside SA SARS published rates per country 20
Example Unathi had to travel to Cape Town for an on-site recording for an episode of Good Morning South Africa. Unathi is obliged to spend two days and one night in Cape Town. She received an allowance of R850 from her employer. Her employer also paid R2 000 for a return ticket to Cape Town on SAA. Unathi was able to prove that she incurred actual expenditure of R1 050 on meals, accommodation and other incidental costs. Calculate the amount which will be included in Unathi s taxable income. 21
Other allowances Computer allowance? Cell phone allowance? 22
To do Visit SARS website Interpretation note 14 Revise Lectures 36-37 Prepare for Practical 13 Read Chapter 11.4 in preparation of next week s lectures 23
Something to think about 24