Many companies use fringe benefits as a means of maximising cash flow and providing staff and directors with extra benefits as part of their packages. While this practice frees up cash that would otherwise be paid out, many fringe benefits are taxable. With fines and penalties for failure to declare and non-payment of company taxes becoming increasingly harsh, all business owners should take note of the following taxable fringe benefits:
Giving assets to an employee
This fringe benefit allows a company to transfer ownership of any asset to a member of staff. However, since the value of the asset is normally discounted there may be tax payable on the difference between that value and the normal value of the asset.
Private use of assets owned by the employer or company cars
These assets are company property, and while being used by a member of staff except for business-related activities, there may be a tax implication.
Meals, vouchers and free items
These fringe benefits may be provided as part of a pay package or simple as an added benefit to staff at the discretion of the employer. The cost of these meals may be taxable.
Low interest loans, debts paid on behalf of the employee and medical aid costs
Where a member of staff benefits from the above, the employer should bear in mind that the costs in each case are taxable.
If you have a fringe benefits system operating in your business and are unsure of the tax implications involved, your first course of action should be a consultation with your financial advisor or accounting support agent. By deciding whether fringe benefits are a profitable option for your business and ensuring that you have declared all necessary items, you can rest assured as a business owner that any tax implications have been dealt with in full.