EMPLOYEES’ TAX [PAY-AS-YOU-EARN (PAYE)]

ALLOWANCES AND FRINGE BENEFITS

What are possible allowances and fringe benefits?

Below are the lists of allowances and fringe benefits:

Allowances

  • Subsistence allowance - is any allowance paid by the employer to the employee to cover accommodation, meals or incidentals costs where the employee is, by reason of the duties of his or her office or employment, obliged to spend at least one night away from his or her usual place of residence in the Republic.
  • Travel allowance - is any allowance paid or advance granted by the employer to the employee for the use of his or her private motor vehicle for the employer’s business purposes. Allowance to a holder of a public office - is any allowance granted to the holder of a public officer to cover expenditure incurred by him or her in connection with such office.

Fringe Benefits

  • Acquisition of an asset at less than the actual value (other than money) - it’s a taxable benefit when an asset is acquired by you from the employer or any associated institution in relation to the employer or from any person by arrangement with the employer, at less than its actual value.
  • Right of use of an asset - it’s a taxable benefit when an employee is granted the right of use of any asset (other than residential accommodation or any motor vehicle) for his or her private or domestic purposes either for free or for a consideration less that the value of such use.
  • Right of use of a motor vehicle - it’s a taxable benefit when an employee is granted the right of use of any motor vehicle for his or her private or domestic purpose either for free or for a consideration less that the value of such use.
  • Meals, refreshments and meal and refreshment vouchers - it’s a taxable benefit when the employee has been provided with any meal or refreshment or vouchers either for free or for a consideration less than the value of such meal, refreshment or voucher.
  • Accommodation - it’s a taxable benefit when the employee has been provided with residential accommodation either for free or for a rental consideration which is less than the rental value of such accommodation.
  • Free or cheap services - it’s a taxable benefit if any service has, at the expense of the employer, been rendered to the employee (whether by the employer or by some other person), where that service has been utilised by the employee for his or her private or domestic purposes and no consideration was given by the employer or consideration given is less that the cost of such service.
  • Low interest or interest free loans - it’s a taxable benefit if a loan has been granted to the employee by the employer, or by any other person by arrangement with the employer or any associated institution in relation to the employer and either not interest is payable by the employee or interest payable by the employee is lower than the official rate of interest (excluding loans granted for purposes of buying a qualifying equity share, or any stamp duties or uncertified securities tax payable for that share).
  • Subsidies in respect of loans - it’s a taxable benefit if the employer has paid any subsidy on the interest or capital repayments payable by the employee for the loan, if the amount payable by the employer exceeds the amount of the interest which, if calculated at the official rate of interest, would have been payable on such loan.
  • Medical scheme contributions paid by an employer - it’s a taxable benefit if the employer has, directly or indirectly, made any contribution to a medical scheme for the benefit of any employee or dependants of such employee.
  • Medical costs incurred by an employer - it’s a taxable benefit if the employer has incurred, directly or indirectly, any amount (other than a medical scheme contribution paid to a registered medical scheme) in respect of medical, dental and similar services, hospital services, nursing services or medicines provided to the employee, his or her spouse, child, relative or dependant.
  • Payment by an employer to an insurer - it’s a fringe benefit if the employer has made any payment to any insurer under an insurance policy directly or indirectly for the benefit of the employee or his or her spouse, child, dependant or nominee.

Top Tip: The Employment Tax Incentive encourages employers to employ young workers by providing a tax incentive to the employers. Read more.

 

 

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 Top FAQs

Why has there been a change from medical tax deductions to medical tax credits?
The system of tax credits is fairer. All taxpayers, regardless of income, derive an equal tax benefit because tax credit amounts are fixed.

What is the difference between a medical tax credit and a tax deduction?
A tax deduction lowers the tax payable by reducing taxable income. A tax credit reduces the amount of tax to be paid by subtracting the tax credit from the tax payable.

What is a medical schemes fees tax credit for under 65s?
A medical scheme fees tax credit is a tax rebate which is deducted from the normal tax payable by a taxpayer who is a natural person on account of contributions made to a medical scheme registered under Medical Schemes Act No 131 of 1998

When will the medical tax credit changes be effective?
The proposed changes will be effective from the 1st of March 2012 for the 2013 tax year.

How will taxpayers older than 65 years be affected by the new medical tax credits?
The medical tax credit does not affect a person who is 65 years or older as they can deduct the full amount of their medical scheme contributions.