Case Study - Motor Industry Company Cars

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Information about Case Study - Motor Industry Company Cars

Published on September 21, 2015

Author: WesselRoux


1. Case Scenario Tax Implication of Company Cars in the Motor Industry Benefits of keeping a logbook Case Analysis One of the benefit of the motor industry is the use of a motor vehicle. This result in a fringe benefit where personnel is taxed on a monthly basis based on the average Dealer Billing Price (from 1 March 2015). From discussions with people in the industry, the keeping of a logbook is not common practice which could result in nega- tive tax implications. The table below shows the different tax implications. Tracking systems with a logbook function is not always an option as it would require the contract to be taken over by the buyer which may not be his/her preferred service pro- vider. The financial costs of the logbook option is also high compared to data loggers, both on the initial capital cost and monthly subscription. Manual recordkeeping is seen as a necessary evil and can take between 30 and 40 hours per year to complete. Smaller electronic recording devices can record up to 6 weeks of data before it needs to be downloaded. This again places a burden on users. Most of these devices does not give the actual address of the end destination and require user input to manually look up GPS points on Google Maps in order to manage it. Antennas need line-of-sight which may result in lost distances in many cases. Additional functionality to consider is the ability to change between Business or Private whilst driving. Elogger Solution • Plug the Elogger into the lighter socket Stow away out of sight. • All trips will be recorded automatically Transfer Elogger to new vehicle when required • Download data once a year for tax purposes On-site download service available for more the 5 users • Elogger data in Excel format Date, time, distance, actual end destination September 2015

2. Dealer Billing Price R 350 000 Monthly Annual Fringe Benefit @ 3.5% R 12 250 R 147 000 R 9 800 R 117 600 Taxation @ 35% R 3 430 R 41 160 Logbook records kept Tax Return No Logbook Business Travel 20% Business Travel 50% Business Travel 80% Fringe Benefit @ 3.5% R 147 000 R 147 000 R 147 000 R 147 000 Business Travel deduction R 0 -R 29 400 -R 73 500 -R 117 600 Taxable Income R 147 000 R 117 600 R 73 500 R 29 400 Taxation @ 35% (illustration) R 51 450 R 41 160 R 25 725 R 10 290 Deducted via payroll -R 41 160 -R 41 160 -R 41 160 -R 41 160 Tax Due/(Refund) R 10 290 R 0 -R 15 435 -R 30 870 Taxed Monthly Fringe Benefit @ 80% National Distributor Asset Management Solutions Wessel Roux Tax Implication (based on 2015/16 tables) Interpretation The financial benefit of keeping a logbook is clearly demonstrated in the tables above. Taking into account that travel between “Home” and “Office” is classified as Private, the taxpayer will still travel on average 50% for Business. This will result in a tax refund of R15 435 on the tax return.. Many taxpayers are used to the monthly deduction of 80% of the fringe benefit and does not necessarily see the value of keeping a logbook in the tax return as the negative impact forms part of the tax due/refund.

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