Page 625 - SAIT Compendium 2016 Volume2

IN 72 Income Tax acT: InTeRPReTaTIon noTes IN 72
Example 10 – Employee bears costs
Facts:
Y, an employee of Company ABC, has been granted the right to use Company ABC’s motor vehicle. The motor vehicle was acquired by Company ABC at a cost of R400 000 (including VAT) and included a maintenance plan. Y maintains a logbook which proves that 36 000 km were travelled during the year of assessment, of which 17 000 km are business kilometres. Y is responsible for all licence, insurance and fuel costs incurred on the motor vehicle, which amounted to R650, R16 200 and R30 000, respectively. Y also pays Company ABC R1 000 per month for the use of the motor vehicle. Company ABC is not entitled to an input tax claim for VAT. Y had the use of the motor vehicle for the full year of assessment.
Result:
The cash equivalent of the value of the taxable bene t for Y is calculated as follows: R
The monthly value of private use is R400 000 × 3.25% Annual value of private use (R13 000 × 12)
Less: Business use reduction
= value of private use x business km / total km = (R156 000 × 17 000 km / 36 000 km)
Less: Licence cost reduction
= actual costs x private km / total km = (R650 × 19 000 km / 36 000 km)
Less: Insurance cost reduction
= actual costs x private km / total km = (R16 200 × 19 000 km / 36 000 km)
Less: Maintenance cost reduction
= not applicable as Y did not bear the full maintenance costs Less: Fuel cost reduction:
= private km x fuel rate per kilometre per Gazette
= (19 000 km × R1,193a)
Adjusted value of private use
Less: Consideration
Cash equivalent of the value of the taxable bene t
(that is, the value of the bene t subject to income tax on assessment)
a As per the cost table in Annexure B.
Note: The cash equivalent is calculated at 3,25% because the motor vehicle was subject to a maintenance plan at the time of acquisition. Y did not therefore incur the full cost of maintenance and may not claim a reduction in respect of any maintenance costs.
13 000 156 000 (73 667)
(343)
(8 550)
(0) (22 667)
50 773 (12 000) 38 773
Example 11 – Employee receives a travel allowance and pays the costs
Facts:
Y, an employee of Company ABC, has been granted the right to use Company ABC’s motor vehicle. The motor vehicle was acquired by Company ABC at a cost of R400 000 (including VAT) and included a maintenance plan. Y maintains a logbook which proves that 36 000 km were travelled during the year of assessment, of which 17 000 km are business kilometres. Y is responsible for all licence, insurance and fuel costs incurred on the motor vehicle, which amounted to R650, R16 200 and R30 000 respectively. Y also pays Company ABC R1 000 per month for the use of the motor vehicle. Company ABC pays all employees who travel for work (including Y) a travel allowance of R2 000 per month. Company ABC is not entitled to an input tax claim for VAT. Y had the use of the motor vehicle for the full year of assessment.
Result:
Allowance included in taxable income
(section 8(1) – no deduction for costs incurred)
The cash equivalent of the value of the taxable bene t for Y,
R
24 000
saIT comPendIum oF Tax LegIsLaTIon VoLume 2
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