MY dad served 34 years at the Johannesburg branch of the reformatory school for boys in Tokai. He might have moved on were it not for four free fringe benefits: a house, use of the school clinic and quack, education for his sons, and lunch.
Fringe benefit tax planning for directors is now a lame duck that is frowned upon by remuneration committees. But that does not mean there are not attractive legal fringe benefits that could really help lower-income employees in these hard times.
Years ago, the South African Revenue Service closed down tax-free bursary schemes because only directors’ children ever had the requisite brains and financial need to qualify. Later, section 10(1)(q) allowed tax-free bursaries for employees’ children, but only if the employee’s income was below R100,000 a year and the bursary was less than R10,000 a year. Few noticed that section 10(1)q also allows the payment of the employees’ continued studies to an unlimited extent.
The 2013 income tax bill substantially increases the fringe benefit tax thresholds to cover all employees earning R250,000 a year. The R10,000-a-year bursary limit will remain for bursaries up to matric level, but it will be increased to R30,000 a year for any qualification above matric level.
Another amendment creates an income tax exemption when an employer sells residential accommodation to an employee earning less than R250,000 a year if the market value of the property is less than R450,000.
Fringe benefit tax is never charged on staff canteen meals or the use of an employer-provided clinic, quack or shrink. The use of the company gymnasium, computers, bandwidth and cellphones are all free of such tax. It is even still possible to reimburse for the use of a car, tax-free, up to 8000km a year at R3.16 a kilometre.
With a little imagination and a bit of effort, these fringe benefits can be structured into the lower-income earners’ package without the employer facing the risk of a full-frontal lobotomy in the event of an employees tax inspection. A corporate social investment profile is not always about bleeding-heart causes. It is a fundamental responsibility of management to look after all employees as best it can.
By Prof Matthew Lester
Lester is a professor at the Rhodes Business School, Grahamstown
This article was first published in Sunday Times: Business Times
Source: Business DaySource: Business Day