COVID-19 and deductions resulting from your motor car in the 2021 tax year

COVID-19 and deductions resulting from your motor car in the 2021 tax year

• 03 February 2021
• Tax
• South African Accounting Academy

The COVID-19 lockdown and a subsequent migration towards working from home may have a profound impact on an individual taxpayers’ income tax liability due to their cars having been parked in their garages for extended periods during the 2021 tax year.
This article deals with the potential impact of the lockdown on company car fringe benefit tax and travel allowance deductions.

Currently 80% of travel allowances are subject to the deduction of PAYE. When submitting tax returns for a tax year, employees may make deductions against the allowances based on log books proving business travel.

Before Covid-19 made its presence felt, most recipients of travel allowances were also happy recipients of income tax refunds (an annual tax bonus) when they claimed business travel costs against their travel allowances.

Then came March 2020 lockdown…

For the 2021 tax year the annual “tax bonuses” are likely to disappear and potentially transform into tax debts to SARS. The reason for this is the likelihood of low actual business travel during the lockdown period.

Whether or not your company car is parked in your garage and never used, fringe benefit tax remains payable on the employer provided motor car on the basis that you had the right to use the vehicle.

If the vehicle was parked unused in the garage for the entire tax year, there is no relief as there would be no business travel to take into account.

Click here to access the full article.

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