South Africa Company Car Tax Calculator

How the company car fringe benefit works

Paragraph 7 of the Seventh Schedule to the Income Tax Act treats the right to use an employer-owned vehicle for private purposes as a taxable benefit. The value of that benefit is fixed by formula, not by what the car actually costs you: 3.5% of the determined value per month, or 3.25% where the vehicle was covered by a maintenance plan when the employer acquired it. Nothing about your driving pattern changes that starting figure — only the later logbook adjustment does.

The determined value is normally the retail market value of the vehicle including VAT, but excluding finance charges and interest. Where the employer leases the car under an operating lease, the cost under that lease is used instead. Extras fitted at the time of acquisition form part of the value; the licence and registration fee does not. If you receive a second vehicle, the benefit on the additional car is calculated on the full determined value with no reduction unless the private use of that car is incidental.

80% versus 20% inclusion

For monthly payroll, your employer includes 80% of the fringe benefit in your remuneration and deducts PAYE on that. Where the employer is satisfied that at least 80% of the annual kilometres will be for business, only 20% is included. This is a cash-flow rule: on assessment SARS recalculates the benefit using your actual business kilometres, so a high business-use driver on the 80% inclusion typically gets a refund, and a driver on the 20% inclusion who cannot prove the business travel will owe SARS money.

Keep a logbook — it is not optional

Without a logbook there is no reduction on assessment. Record the opening odometer at 1 March, the closing odometer at the end of February, and for each business trip the date, destination, reason and kilometres. SARS publishes a logbook template each filing season, and eFiling will reject a travel claim that is not supported by one if you are audited.

Costs you pay yourself

On assessment the benefit can be reduced further where you personally bear the full cost of the fuel used for private travel, or the full cost of maintaining the vehicle. The reduction is calculated using the SARS fixed rate per kilometre for the relevant tax year multiplied by your private kilometres, so keep fuel and service slips together with the logbook.

Company car or travel allowance?

A travel allowance is taxed on 80% of the allowance (20% where business use is at least 80%) and is reconciled against a logbook using either actual costs or the deemed cost tables. A company car is taxed on the determined value regardless of your own spend. As a rough guide, a company car tends to work out better on expensive vehicles with high private mileage and full employer-paid running costs, while an allowance suits someone driving a cheaper car with heavy business mileage. Run both: compare the take-home pay of each package before you accept it.