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Understanding the Tax Implications of Employee Benefits
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Assignment Task
Question
1. You have been provided with the following information for Floyd’s Paintshop:
| January 2019 | Age | Salary | Travel allowance | Commission |
| O. Nche | 66 | R 11 415.00 | R 2 283.00 | R 1 427.00 |
| M. Marx | 51 | R 62 782.00 R | R 15 696.00 | R 0.00 |
| P. du Toit | 76 | R 34 245.00 | R 0.00 | R 0.00 |
| S. Kolisi | 43 | R 39 952.00 | R 0.00 | R4 994.00 |
| F. de Klerk | 36 | R 13 127.00 | R1 969.00 | R 1 116.00 |
| R. Page | 20 | R 13 127.00 | not applicable | not applicable |
| T. Fischer | 18 | R 14 269.00 | not applicable | not applicable |
| Taxable portion of travel allowance | Taxable value of company car | Taxable value of medical aid | Taxable value of pension fund | |
| O. Nche | ? | R 0.00 | ? | ? |
| M. Marx | ? | R 0.00 | ? | ? |
| P. du Toit | R 0.00 | ? | ? | ? |
| S. Kolisi | R 0.00 | R 0.00 | ? | ? |
| F. de Klerk | ? | R 0.00 | ? | ? |
| R. Page | not applicable | not applicable | not applicable | not applicable |
| T. Fischer | not applicable | not applicable | not applicable | not applicable |
| Pension fund deduction | PAYE/SDL remuneration | UIF remuneration | PAYE deduction | |
| O. Nche | ? | ? | ? | ? |
| M. Marx | ? | ? | ? | ? |
| P. du Toit | ? | ? | ? | ? |
| S. Kolisi | ? | ? | ? | ? |
| F. de Klerk | ? | ? | ? | ? |
| R. Page | not applicable | ? | ? | ? |
| T. Fischer | not applicable | ? | ? | ? |
Additional information
2. The following tax tables for individuals applied for the year ended 28 February 2019
| Taxable income of individuals (R) | Tax payable |
| R0 – R195 850 | 18% of each R1 |
| R195 851 – R305 850 | R35 253 + 26% of taxable income above R195 850 |
| R305 851 – R423 300 | R63 853 + 31% of taxable income above R305 850 |
| R423 301 – R555 600 | R100 263 + 36% of taxable income above R423 300 |
| R555 601 – R708 310 | R147 891 + 39% of taxable income above R555 600 |
| 708 311 – 1 500 000 | R207 448 + 41% of taxable income above R708 310 |
| 1 500 001 and above | R532 041 + 45% of taxable income above R1 500 000 |
2.1. Both O. Nche and M. Marx receive a guaranteed 13’th cheque. The business ‘smoothes’ the tax on the bonus throughout the year.
2.2. P. du Toit has the full use of a company car. This car (a delivery vehicle) had cost the business R434 782.61 (excluding VAT @ 15%) when it was bought and allocated to him last year, there is no maintenance plan on this car. The value of the monthly taxable fringe benefit for the use of a company car is 3.5% of the cost of the vehicle (including VAT). 80% of this taxable fringe benefit is included in remuneration for the purposes of determining PAYE payable.
2.3. Perminant employees contribute 7% of their basic salary to the JD Pension Fund (13’th cheques are also pensionable). Floyd’s Paintshop contributes to the pension fund on a randfor-rand basis excluding the 13’th cheques.
2.4. R. Page and T. Fischer are part time employees that worked for 38 and 22 hours for the month respectively.
2.5. Employees are not entitled to housing, cellphone or computer allowances.
2.6. There are no independent contractors or employees on registered learnerships.
2.7. Only 80% of the travel allowance is taxable.
2.8. Assume a maximum UIF funding salary of R14 872.00 2.9 All permanent employees belong to the FMF Healthcare, a registered medical scheme and have all provided adequate proof of membership to their employer. The company pays the whole contribution to the medical aid. The following monthly tax credits apply:
- R310 for the main member,
- R310 for the first dependant, and
- R209 for each additional dependant
The staff members have the following number of dependants and medical aid contributions:
| Employees | Number of dependen ts | Total monthly contribution to medical aid |
| O. Nche | 0 | R 1 598.00 |
| M. Marx | 4 | R 6 278.00 |
| P. du Toit | 2 | R 4 109.00 |
| S. Kolisi | 3 | R 5 593.00 |
| F. de Klerk | 1 | R 2 232.00 |
2.10. The tax thresholds and rebates allowed in the South African tax system are as follows for the 2018/19 tax year:
| Tax Year 2018/19 | TaxThresholds T | Tax Rebates |
| Below age 65 | R78 150 | R14 067 |
| Age 65 to 74 | R121 000 | R7 713 |
| Age 75 and over | R135 300 | R2 574 |
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