DriveHubCountry guide · South Africa
Company car fringe benefit in South Africa: 3.5% a month, and how a logbook reduces it
The short answer
The company car fringe benefit in South Africa is not worked out from your kilometres. If your employer gives you a car you may also use privately, it is a monthly charge on the car's value: 3,5 % of the determined value per month, reduced to 3,25 % where a maintenance plan was in place. That is Seventh Schedule to the Income Tax Act, paragraph 7(4)(a)(i).
Distance enters only as a reduction. Paragraph 7(7) reduces the benefit "in the same ratio as the number of kilometres travelled for business purposes bears to the total amount of kilometres travelled", and only "Where accurate records of distances travelled for business purposes in such vehicle are kept". No records, no reduction. That is the whole reason a logbook matters on a company car.
How the monthly charge is built
- Rate. 3,5 % of the determined value, every month. 3,25 % where a maintenance plan was in place.
- Determined value. The value of the car that the percentage is applied to. Your employer can tell you the figure.
- Per month. The charge does not depend on how far you drove. A month of mostly private driving and a month of mostly business driving carry the same starting charge.
An illustration, not a figure for your car: on a determined value of R400 000, 3,5 % is R14 000 a month (400 000 × 0,035). The logbook does not change that starting charge. It changes the reduction applied to it.
What the reduction needs: business kilometres over total kilometres
Paragraph 7(7) works on a ratio. Say you drove 20 000 km in the tax year and 12 000 km of it was for business. The ratio of business to total kilometres is 12 000 ÷ 20 000, which is 0,6, or 60 %. That is the figure the reduction is built on.
Notice the denominator: total kilometres. A list of business trips gives you the top of the ratio. The bottom covers private driving too, and SARS's eLogbook asks for two odometer readings every year.
The two odometer readings
SARS's eLogbook asks you to "record your vehicle's odometer reading on 1 March each year…and again on the last day of February", and adds: "Without these readings, you cannot claim a tax deduction!" The South African tax year runs from 1 March to the last day of February, so the two readings bracket it. More on that in the 1 March odometer reading.
The same minimum information as for a travel allowance
You do not need a different logbook for a company car. SARS's eLogbook lists the minimum for business travel: "Date of travel • Kilometres travelled • Travel details (where to and reason for the trip)." Then it says: "The same minimum information as set out above is also required for company cars."
The per-trip odometer columns on the form are marked "These fields are not compulsory". Private travel need not be detailed; only business travel must. Electronic logbooks are accepted. Keep one logbook per vehicle if you used more than one in the year.
The private-fuel reduction, paragraph 7(8)
A second reduction exists for fuel. Where you pay for the private fuel yourself, paragraph 7(8) allows a reduction, and it asks for "accurate records of distances travelled for private purposes". So this one needs a record of private distance, the mirror image of what a business log holds.
It has an exclusion. Paragraph 7(8) does not apply to a car your employer holds under an operating lease. If your car is leased by your employer that way, this reduction is not available, whatever you record.
What happens without the records
- The reduction is lost. Paragraph 7(7) applies only where accurate records of business distance are kept, and paragraph 7(8) only where accurate records of private distance are kept.
- Records must be kept for five years from submission of the return, under section 29(3)(a) of the Tax Administration Act 2011.
- Not keeping them can be an offence. Section 234(2)(e) covers a person who "wilfully or negligently fails to … retain records as required under a tax Act", who is "liable, upon conviction, to a fine or to imprisonment for a period not exceeding two years."
- SARS can audit the logbook. The eLogbook says SARS "reserves the right to audit and query the content or information recorded by the taxpayer in any logbook."
DriveHub for the company-car logbook
DriveHub does not calculate the fringe benefit and does not tell you what tax is due. It keeps the record the reduction rests on. With location access set to Always, DriveHub records every drive in the background, and if it ever misses one, it tells you. It files most trips as Business or Personal by your places, past routes and working hours, and asks you about the rest. The question offers Business, Personal and Commute, so the drive between home and your regular workplace can be answered as Commute rather than forced into one of the others.
In Settings, under How you use this car, choose A company or business-owned car. A report about one car then prints a Business use block with the Business distance, the Total distance and the percentage. It also states whether the total is the odometer difference or the sum of recorded trips. That is the paragraph 7(7) ratio. The 1 March and end-February readings you enter print as Odometer, tax year.
If you pay all the private fuel, set the car's ownership to Company car, I pay for fuel and enter its value (Cost or value, under For SARS on the vehicle screen). The report then also prints Private fuel you paid for: your Private distance since 1 March, the SARS fuel rate for the car's value band, and the Reduction of the taxable value. That is the paragraph 7(8)(b) reduction. It says the reduction does not apply to a car your employer holds under an operating lease, and that it is claimed on assessment. The vehicle screen also asks the ITR12 questions: purchase date, cost or value, and when business use began and ended.
DriveHub is on the App Store for iPhone. The South African rules are on the South Africa page. Setting up automatic tracking takes a few minutes, once.
More for South Africa
A car you own, with an allowance from your employer, is a different regime with its own rate: see travel allowance or reimbursement. Meals and incidentals on a trip with a night away are in the subsistence allowance.
This page states what the Seventh Schedule, the Tax Administration Act and SARS's own eLogbook say, and names them so you can check. It is not tax advice. It can't account for your circumstances. Where money is involved, ask your tax practitioner, and bring your logbook.
Do it in DriveHub
South Africa: travel allowance deduction →
Choose how your employer pays you, record the 1 March odometer and read the SARS cost-table deduction.
The full rule for South Africa, with the instruments it comes from: mileage log requirements in South Africa.