Fringe benefits – what do they mean for the individual tax payers

Annja Louca, Contributing Author: The Practical Accountancy Loose Leaf, 16 Jul. 2015

Tags: fringe benefits, tax payers, tax season, tax return, tax return codes

The individual income tax season started and you may be wondering why you’re taxed on fringe benefits. Especially if you didn’t necessarily receive the amount as cash in your pocket.

Well a fringe benefit is a perk you enjoy as part of your employment. It could be using the company car, the company holiday home or even getting free or cheap products from your employer. So your employer pays the fringe benefits over and above your gross salary. And it forms part of your annual taxable income. So it’s on your tax return.

There are 15 fringe benefits you need to know about. Read on as I tell you what they are and how much they’ll cost you.

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Before I tell you about the 15 fringe benefits, let me quickly tell you why your employer pays fringe benefit tax.
Your employer’s obliged by law to include this in the monthly payroll for you and all staff that enjoy fringe benefits as part of your employment. He’ll withhold the tax from your pay at the end of the month. If he doesn’t, he’ll be held responsible and could get penalised.
15 Types of fringe benefits and the income tax value
  1. If your employer gives you an asset at no value or a low value. Use the market value or cost price of the asset. This goes onto Code 3801 on your IRP5.
  2. If you use company owned assets. 15% of the value of the asset will be included in your yearly taxable income if your employer owns the asset. If you’re leasing it, then only the monthly rental amount will be included in the monthly taxable income calculation. This also goes on Code 3801 on your IRP5.
  3. If you use the company car for private use. 10% of the value of the car will be included in your yearly taxable income. This goes into Code 3816 on your IRP5
  4. If you get free meals, refreshments etc., outside your normal workplace and working hours. This is taxed on whatever your employee paid (minus what you paid). This also goes into Code 3801 on your IRP5.
  5. Free residential accommodation. The tax is on the difference between the market value and the amount you got it for. This is in Code 3805 on your IRP5.
  6. Low or no fee services/products provided by your employer.  The tax is on the difference between the market value and the amount you got it for. This is in Code 3806 on your IRP5.
  7. Did you get a loan at no charge or low interest rates? This is taxable at the cost amount or payment amount.  It’s shown on Code 3801 on your IRP5.
  8. Subsidies you receive. This is taxed at the cost amount, or payment amount.  It goes into Code 3801 on your IRP5. 
  9. If your employer pays for your insurance contributions, this is taxed at the payment/cost amount. It goes into Code 3801 on your IRP5.
  10. Does your employer pay your medical aid paid, or medical expenses? This is also taxed at the payment/cost amount. Use Code 4005 on your IRP5 for the fringe benefit value of medical aids. And Code 3813 if your employer paid the medical expenses.
  11. Any of the above benefits paid by your employer to your family or relatives.  This is also taxed at the payment/cost amount. You can use the same IRP5 codes as above.
I often find some employers often forget about the fringe benefits they technically give to their staff. And they usually don’t include it in the payroll. Watch out for the following:
  1. Prizes you receive for reaching sales targets.
  2. Credit cards to buy personal items i.e. food etc.
  3. Holiday accommodation provided to the employees at no cost is a fringe benefit and will be taxed.
  4. Expensive gifts your employer buys for you as a reward for work done.
Well there you have it. Now you can check up on your fringe benefits tax.
Until next time
Annja Louca
Contributing Author: Practical Accountancy Loose Leaf Service

P.S. For answers to frequent questions on fringe benefits, simply click this link…

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