Option Added for Taxing Company Car at 100%

If you have an employee with a company car, the following options for taxing the fringe benefit are available on SimplePay:

  • Taxable at 80% if the employee uses the company car for less than 80% for business purposes.
  • Taxable at 20% if the employee uses the company car for more than 80% for business purposes.

This is often referred to as the SARS 80/20 rule, which outlines that employees with company cars and travel allowances are taxed either 80% or 20% based on the proportion of use for business purposes.

However, some employees have company cars that are used only for private purposes (in other words, it is not used for business at all). This means that on assessment, the fringe benefit for the company car will be 100% taxable by SARS.

To avoid the employee having to pay in tax, some employers used the Voluntary Tax Over-Deduction system item to deduct additional tax. However, this requires a manual calculation of the additional tax that the employee should pay. To make this process easier, we have now added additional functionality to the Company Car system item. When adding a company car under Regular Inputs, there is now an option to select “100%”  as the Taxable Percentage.

For more information on the Company Car system item, refer to our help page here.

We hope that this new functionality makes payroll even more effortless and we continue working towards making payroll simpler and easier for you.

Team SimplePay

Interest Rate Change for Employer Loans

The South African Reserve Bank has decided to increase the repurchase rate (repo rate) by 25 basis points, effective from 23 November 2018.

The official interest rate used for calculating the fringe benefit on low or interest free loans to employees is set as 100 basis points above the repo rate. This means that the interest rate used for calculating the fringe benefit on employer loans increases from 7.5% to 7.75%, effective 23 November 2018.

If you’re a SimplePay user, you do not need to take any action to implement the new interest rate, as we have already updated our system to reflect these changes. Therefore, all payslips dated and finalised from 23 November onwards will use the new interest rate. If a payslip dated after 23 November was finalised before the 23 November (i.e. it was finalised in advance), you will need to unfinalise the payslip and then finalise it again for the changes to take effect. As we have built our system to be intuitive, the previous interest rate will be used if you are still preparing payslips dated before the 23 November, regardless of what date you physically finalise the payslip.

If you are unsure of how to capture employee loans or calculate the fringe benefit on them, refer to our help page here.

Team SimplePay