Three fringe benefits I bet you didnâ€™t know are taxable
43984, 03 Dec. 2014
There’s a lot of confusion when it comes to fringe benefits.
Most of the confusion comes from the fact that employers aren’t sure about which fringe benefits are taxable and those that aren’t.
As a result, they give out perks to employees without withholding and deducting the necessary employees’ tax.
SARS easily spots this and then hits them with a 10% penalty. In this tough economy, any penalty will affect your bottom line.
Don’t take chances.
Read on to discover three fringe benefits you must tax.
Taxable fringe benefit #1: Giving your employee an asset for free
By “asset”, we mean goods, commodities, financial instruments or property of any nature (other than money).
So if, for example, you buy a smartphone for one of your top executives so he can enjoy the better connectivity in the office and with his clients, you must account for tax.
The cash equivalent of the benefit is the difference between the value of the asset and what your employee pays for it. This amount is remuneration and you must deduct employees’ tax from it.
Taxable fringe benefit #2: Giving employees free meals, refreshments or meal vouchers
Some employers like to show their appreciation by giving employees free meals, refreshments or meal vouchers.
But this form of generosity comes with tax implications.
If you give these free of charge or for less than their actual value, you must tax this as a fringe benefit.
If you want to give staff meals and refreshments, tax free, you have to be clever about it. You can consider these four options…
There’s no fringe benefit tax on any meal or refreshment if:
- You give your employees in any canteen, cafeteria or dining room you operate or is operated on your behalf;
- You give your staff on your premises;
- You give your employees during business hours or extended working hours or on a special occasion;
- Your employees benefit from when you entertain clients.
If you contribute to any insurance policy for your employee, their spouse, child, dependent or nominee, it’s a taxable fringe benefit.
Remember, the amount of the taxable fringe benefit is equal to:
- The total value of the premiums you pay for your employee; or
- Any premium you pay for an income protection policy.
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