Which is more tax-efficient: a company car fringe benefit or a travel allowance.
Lower-tax option
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Company car taxable value
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Travel allowance taxable value
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Two ways to be paid for driving
If your job involves a car, your employer can structure the benefit in one of two ways, and they are taxed on completely different logic. With a company car you drive a vehicle the employer owns, and you are taxed each month on a fixed percentage of what the car cost, called its determined value. With a travel allowance the employer pays you a cash amount toward running your own car, and you are taxed on that allowance less a deemed business cost. This calculator works out the taxable value of each route from the same inputs so you can see which one adds less to your taxable income, and therefore costs you less in PAYE at your marginal rate. It compares taxable values rather than final tax, which is the cleaner comparison because it isolates the choice from the rest of your tax position.
The percentages and the per-kilometre rate the tool uses are the figures this calculator applies. The company car fringe benefit is taxed at 3.5 percent of the determined value per month, dropping to 3.25 percent if the car has a maintenance plan, and the travel allowance uses a prescribed rate per business kilometre. All three are worth confirming against the current SARS figures before you commit.
How business use rescues each option
Both routes reward business mileage, but through different doors. For a company car, the monthly fringe benefit is reduced in proportion to the share of kilometres driven for business, proven by a logbook. Drive 60 percent for business and only 40 percent of the fringe benefit is taxed. For a travel allowance, you subtract a deemed business cost calculated as your business kilometres multiplied by the prescribed rate, and whatever allowance is left over is taxable. In both cases, a logbook is not optional; without it SARS will tax the full benefit or the full allowance.
Take a R450,000 car, 18,000 business kilometres out of 30,000 total, a R120,000 annual travel allowance, and no maintenance plan. Using the rates this calculator applies, business use is 60 percent.
| Route | Working | Taxable value |
|---|---|---|
| Company car | R450,000 x 3.5% x 12 x 40% private | R75,600 |
| Travel allowance | R120,000 less 18,000 km x R4.76 | R34,320 |
The travel allowance adds R34,320 to taxable income against R75,600 for the company car, so the allowance is the lower-tax option here by a wide margin. At a marginal rate of, say, 31 percent that is a PAYE difference of roughly R12,800 a year. The chart compares the two taxable values.
A cap this tool deliberately ignores
One simplification is worth flagging so you do not over-rely on the allowance result. This calculator applies the prescribed per-kilometre rate to all of your business kilometres, but the SARS simplified method, where you keep no detailed cost records, is available only up to 8,000 business kilometres a year. Above that you generally need actual cost records and the fixed-cost tables to claim, which can give a different deduction. In the example, 18,000 business kilometres exceeds that 8,000 ceiling, so a real claim using the simplified rate alone would be capped, and the allowance might look slightly less favourable than the clean figure here. The direction of the answer, allowance beats car at high business mileage, still holds, but treat the exact rand value as the tool's model rather than a SARS-certified deduction, and confirm the method and rate that fit your records.
Does a maintenance plan change which option wins?
It helps the company car. With a maintenance plan the monthly fringe benefit drops from 3.5 percent to 3.25 percent of determined value, as applied by this calculator, lowering the company car's taxable value. It rarely flips a clear allowance win at high business mileage, but on a low-mileage, expensive car it can narrow or close the gap, so toggle the option and compare.
What is the determined value of the car?
Broadly the cost of the vehicle including VAT, with specific rules on accessories and on cars the employer did not buy new. The monthly fringe benefit is a percentage of that value, so a more expensive car carries a heavier company car tax. This tool uses the vehicle value you enter as the determined value for the calculation.
Will I get money back when I file my return?
Possibly. PAYE on a travel allowance is usually deducted on a portion of the allowance during the year, and your actual business kilometres are only confirmed by your logbook at assessment, so a high-mileage year can produce a refund. The taxable values this tool shows are the annual figures the assessment works toward at the rates this calculator applies; keep a compliant logbook or the deduction falls away.