The decisions relating to the actual allowance to be paid needs careful consideration by the company. These points should also be thought about by yourself if you are able to select an allowance from your remuneration package.

• Maintenance costs and control
• Interest rates
• Allocation of credit risk
• Use of fleet cards
• Petrol allowance
• Type of financial transaction
• Insurance
• VAT input credits

MAINTENANCE
If maintenance is paid by the employee, no VAT input can be claimed by the company. On an average cost of R400.00 per month, VAT is R50.00 or R600.00 per year. On 50 vehicles over four years, this equals R120 000.00. It is financially better for the company to pay for maintenance, claim the VAT inputs and reflect the costs on the employee's IRP5 form. The easiest way to do this is to use maintenance plans for allowance scheme vehicles, or a fleet card with appropriate controls.

INTEREST RATES
If left on their own, employees would get charged higher rates of interest by the banks than the company interest rate. It is better to arrange matters with your bank for a corporate oriented rate. This will reduce the cost of the allowance that needs to be paid to the driver.

FLEET CARDS
These cards should be used to pay for fuel. You will have the advantage of using the monthly reports to control fuel purchases and kilometers traveled. With fuel set to remain at a high cost, it is important to manage these matters properly.

INSURANCE
The same comments made on maintenance are applicable to insurance premiums. Apart from this, an employee is unable to claim any tax allowance on this premium. In a sense, he is "double taxed". Insurance should be paid direct by the employer - not only to be able to claim the VAT, but to reduce the employees tax burdens. Consideration must be given to credit life and "Top Up" insurance.

CALCULATING A CAR ALLOWANCE
This is an example of the calculations needed to set an allowance. Assume the following facts:

Vehicle Price R100 000.00
Fuel 12L / 100 kilometers
R + M Costs (includes Tyres) R 400.00 pm
Kilometers per month 2 500
Interest Rate Prime less 1.5%
Fleet Card R 30.00
Insurance R 500.00
Finance Method Installment sale with 30% RV
Period 4 years

Note the inclusion of a reasonable RV, reduces the monthly payment and in turn, the costs of the allowance for the company.. The calculation is:

Financing R 2 209.92 per month
Fuel R 900.00 per month
R + M R 400.00 per month
Fleet Card R 30.00 per month
Insurance R 500.00 per month
TOTAL ALLOWANCE R 4 039.92

The whole issue of using a RV has been discussed at much length. However, the simple fact is – if you do use a 'reasonable' RV, you will be able to either – buy a better, higher priced car or use less of your actual allowance without this impacting on your perks tax. So, give it some thought before you throw it out 'the window.'

Even though your company pays you a specific car allowance, it is likely that you will not use it, from a financial point of view, in the same way that it was calculated eg. by using a RV. You might also want to buy a higher specced car, at a higher monthly installment and pay for the petrol out of your own pocket. In this situation 'CLICK HERE' to get to the allowance and financial calculator that will help you make this decision.

Once you have made this decision, you can go to the next step which to look for the car you want to buy, price it and compare it with your other options.
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Net Amount available to finance new vehicle R
Purchase price R

You can use three sources of information to help you decide on the car or LDV you want or are thinking about.

Get the latest prices and specs
Search for a specific car
Compare cars and see if you are going to get want you want.

Now before you go making the ultimate decision, it would be a very good idea to look at what the car's operating cost will be. You need to compare these costs in terms of – cost per month in Rands and c/kms terms also what its total life time costs are likely to be over the three or four years you will drive it.

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This is a very easy calculation to do because you should have all the necessary information at your finger tips by now. When you do this calculation don't ignore what might seem to be only a few c/kms difference. Multiply the difference by the number of kilometres that you will drive over time you will keep the car. You might be surprised at how much a few cents adds up to. 'CLICK HERE' to do a cpk calculation.

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Total Monthly Expenditure: R
Total c/Km:

Now is the time to look at what you will have to pay in terms of your Perks Tax.

Your Perks Tax depends on a number of specific things that you must take into account. These are – the annual kilometres you drive – your annual allowance – the price you paid for the car or its deemed value. As far as your marginal tax rate goes, it will normally be the highest level. There are some other issues that relate to business kilometre allowances, deposits and other supplementary payments but the above issues are the normal things to think about.

What you need to do now is 'CLICK HERE' to get to the Perks Tax calculator and see what your situation will be for a full tax year.

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Total perks tax due R
Tax Rebate/Due by you R