The ways and means of tax-free company transport
Sars clarifies when and how your employer can provide transport without you being taxed on the benefit
You will no longer be liable for fringe benefits tax if your employer provides transport to and from work, as long as that benefit has no taxable value attached to it.
Sars has clarified an area of confusion that now makes it clear when company transport will not be a taxable benefit, and may, in fact, open a business avenue for transport companies.
While the provision has been in place for some time, confusion had developed about just what it meant to have a benefit qualified as a taxable fringe benefit for employees, but which had no taxable value.
Sars released an interpretation note (interpretation note 111) that, when read with the binding general ruling (income tax), has clarified exactly when and how you can enjoy transport provided by an employer without paying tax on the benefit.
Wesley Grimm, an associate at law firm Webber Wentzel, says the clarification from Sars is welcome as it means employers can now structure the provision of transportation to their employees better and there could be additional employment opportunities within organisations, as well as a market for niche transport businesses.
When are transport benefits not taxable?
For a transport service to avoid being a taxable benefit, the service must be rendered by your employer directly. In other words, it must be a vehicle that is part of the company fleet and driven by a driver on your employer’s payroll.
However, Grimm says, an employer may also contract a third party to provide transport services to you, as long as the employer sets the following conditions for that service:
- The transport is provided exclusively to employees along pre-determined routes.
- The employees may not request transport services on an infrequent and individualised basis.
- No employee may be a party to the services contract, that is, the contract for providing the services may only be between the employer and transport service provider.
An employee will not be subjected to fringe benefits tax if these conditions are met.
Grimm points out that access to public transport “is not regarded as a transport service provided by the employer for no value”. This means that if you receive a transport allowance, it is a taxable fringe benefit.
To get a better idea of what fringe benefits are, and their tax implications, click here for the Sars explanation.