No need to sweat the small stuff anymore

2008-09-24 00:00

If your company has had the dubious pleasure of being audited by the South African Revenue Service (SARS) for employees’ tax, you will know that the SARS auditors often query the personal use of certain assets granted to employees.

These assets are primarily given to employees for business purposes, but it is inevitable that they will sometimes be used for private purposes.

For example, if an employee has the use of a company cellphone, it is likely that he or she will receive calls from family members, and make personal calls.

Where the employee has a company laptop, he may use it to play music or surf the Internet. If the employee has a company ADSL line installed at home, it is likely that he may also use it to view news websites or send e-mails to friends and family.

Strictly speaking, if an employee uses his office phone for a private call to a doctor, friend or family, that should also be regarded as a fringe benefit.

Currently, where the use of the asset is incidental to the use of the asset for business purposes, then no value is placed on the right of use of the asset for the purposes of calculating a fringe benefit. So the SARS auditors often query the extent to which the asset is used for personal purposes.

Where the personal use of the asset is not incidental (that is, negligible) compared to the business use, SARS would apportion the value of the use of the assets between the business use and the personal use, and will calculate the fringe benefit tax on the personal portion.

This meant that employers often had to make the inquiry as to whether employees were indeed using telephones and computers for personal use and had to establish the extent of personal use, which is often a tiresome and thankless task.

Recognising that this was a burden on the employer to police in that “the value of the tax collected does not justify the administrative costs incurred by employers” and the fact that the revenue impact for SARS was minimal, an amendment was proposed in the draft Revenue Laws Amendment Bill, 2008.

In terms of this amendment, any telephone or computer communication service provided to an employee and used mainly for the purposes of the employer’s business will have no value for the purposes of fringe benefit tax.

So all that employers will be required to do is to consider whether the telephone or computer communication service is used for business purposes for more than 50% of the time, and if it is, no fringe benefit need be calculated.

Of course, if there is little, or no business use, for example where a cellphone is provided to a director’s wife or child, this will still give rise to a taxable fringe benefit!

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