Can I beat the Tax man??

[mountainboy]

Phewww

been a long while since I'm able to post something,so here goes:

28 Aug 2007 will be a special day for me, I get to do my final payment on my cage (which I love  ) . And everybody is hasselling to get a new one - for tax purposes, nogal...

2 of my colleques has been 'fined' R15-20 k's by SARS last yr for not using their car allowance as they should (also using paid up vehicle's for work).

And really -I'm just not prepared to pay R4000 pm (+ insurance) on a vehicle I know will be used perhaps once a week.

I've told that I must a get vehicle of a certain value to recupe returns from the taxman. Is it really the value of the car or the value of my monthly repayments that really matters? Cause herein lie my thoughts:

Continue owning my current cage and up my payments on my bike to say R4000 pm. Then its paid off quicker,I get to keep her (or sell for spare cash) and buy me new baby!!

So - can I beat the taxman??

[Grootseun]

ask your employer to remove the travel alowance, once your scoot has been paid. With the money you save on the repayments, the difference in your salary (now being a little less) will hardly be noticed.

But beating the taxman is a difficult one.. but there are those far more knowledgeble than i

[LostDOG]

Phewww

been a long while since I'm able to post something,so here goes:

28 Aug 2007 will be a special day for me, I get to do my final payment on my cage (which I love  ) . And everybody is hasselling to get a new one - for tax purposes, nogal...

2 of my colleques has been 'fined' R15-20 k's by SARS last yr for not using their car allowance as they should (also using paid up vehicle's for work).

And really -I'm just not prepared to pay R4000 pm (+ insurance) on a vehicle I know will be used perhaps once a week.

I've told that I must a get vehicle of a certain value to recupe returns from the taxman. Is it really the value of the car or the value of my monthly repayments that really matters? Cause herein lie my thoughts:

Continue owning my current cage and up my payments on my bike to say R4000 pm. Then its paid off quicker,I get to keep her (or sell for spare cash) and buy me new baby!!

So - can I beat the taxman??

You dont have to have a car-allowance. Ask your employer to remove the car-allowance portion. Pay your tax, so you dont get fined at the end of the year. The FINE is not a fine, it is making up the difference in Tax. Car allowance taxed at lower rate.

IMO it is better to have a paid-up car (now asset) rather than reduced tax on a liability.

[buzzlightyear]

AFAIK, you can only claim your actual expenses, like services, fuel (I think), tyres, etc. but not the payment of the loan. Here's what I do: I have an old, white paid off car (2 actually), and I take the monthly tax saving I get and put it into my bond. Then when it's time to pay back, I gladly withdraw and pay the money, as I've had the use of it for a year, interest-free.

Don't get drawn into debt again, except when your vehicle is really giving you problems and you really need a new one. Rather start saving at the 28th of August for your next vechicle.

[mountainboy]

If I remove the car allowance,it ups my salary, putting me in a diff tax bracket, which I believe will result in more taxes being deducted each month. Hmmmm

Completely agree about not going into debt (esp with a car -value drops WAY to quickly).

Gonna try to find a tax specialist and see what structure lets me give most moola back in my pocket. That bond payment thing is quite clever actually. And here I thought you just a pretty face 

[surf]

Don't get drawn into debt again, except when your vehicle is really giving you problems and you really need a new one. Rather start saving at the 28th of August for your next vechicle.

"makliker gese as gedaan"

[IceCreamMan]

i have an old car which has been paid off for 10 years or so, still goes , never broken down so i have yet to replace it...i am on a car allowance scheme and always get cahs back..even though the car is old it still has a value an this value is used in calculations for tax purposes...must be said i have purposefully kept my car allowance at a low amount because of the tax implications... it is far better to keep an old car an be liable at year end than to plunge into debt again...

If you only using car once a week your mileage may be too low and you will end up paying in irrespective of whether the car is new or paid for so be careful of that aspect.

60% of your car allowance is taxed anyway so you only be liable at most for the tax on the other 40%.

beat the tax man? Well i dont really think that is possible but you can put yourself in a good position to claim the maximum back.

Them okes that got "fined" 15K , they talking kark .....

dont remove your car allowance completely , it is a valuable tool when purchasing vehicles or making claims with SARS, no car allowance no latitude. Go speak with your HR department to do mock payslips with you juggling the amount of your allowance.

cheers

[Ama ride ride]

Where your normal income (salary) or profit from trading is 100% taxable one only pays tax on 60% of your car allowance.

The 40% is therefore tax free on the condition that you did use your vehicle for the reason you received the allowance.

The higher the value of your vehicle or mileage used in a current tax year the more the allowance benefit you.

If you work for yourself or for commission, depending on the original agreement you can claim all the expenses occurred in earning your income.

If you earn a basic salary and a car allowance you can normally only claim the km you traveled in the year. The more you travel and the more expensive you car is the more you will get out of your car allowance.

Therefore if your friends had to pay back a lot of moolah to the tax man it means that their car allowance is not in par with the km they travel or the value of their cars. They enjoyed the fruit the whole year by paying to little tax and at the end of the year it was calculated that they underpaid and so must pay back.

There are reasons why employers like to give BIG car allowances. The most obvious is that they can pay you a lesser salary because you will pocket a higher amount against when they pay you only a full salary. When the tax man claims his piece of the cake one usually blames the tax man and not the employer.

So to benefit to the max with your travel allowance one has to calculate a fair car allowance and estimate the total km you would travel.

I for one do not have sympathy with people who pay to little tax the whole year and then get slapped with the correct amount at tax year end.

[mountainboy]

Cool,thanks for all the comments guys

I do use my scoot for work purposes - in fact,back in my adventure days, I drove with the vespa into Khayelitsha and Nyanga all the time with a laptop inbetween my legs. People in the townships loved the sight   

Since the service costs for my scoot is about the same for my car, will be I able to claim for cost's per kl travelled??

In essence -my scoot will officially replace the cage for official work purposes.  WOOHAA!!

[wino]

if you don't need a new car, why buy an expensive one just to 'save' some tax? your premium on the car will devour the tax 'saving'. rather pay a bit more tax, and have the cash flow benefit to invest in whatever you fancy

[michnus]

if you don't need a new car, why buy an expensive one just to 'save' some tax? your premium on the car will devour the tax 'saving'. rather pay a bit more tax, and have the cash flow benefit to invest in whatever you fancy

+12.547

[Kaboef]

Damn, AmaRR, you explain it so clearly even I can understand.
Well done.

I echo what Ama and Wino says. Dont buy a car to save on tax. Its stoopid.

[SGB]

The tax man has never bought me anything.  I have made some contribution to his wellbeing however....  The thing with buying a car to save tax is that you have to spend R1 before you can save 50c. 

[Xerys]

My 2 pennies worth when it comes to the car/travel allowance. It may save you some cash now, but if it is for example R 5k p/m, keep in mind that if this amount is added to your salary, your employer must contribute to your pension fund on the total salary  including that R5k p/m. Assuming they pay 50% and you pay 50% of the pf, combined you contribute over R8k annually to your pension fund. The employer thus also saves by not having to fork out that extra wad of cash every month by loading your salary with all sorts of allowances.

[mountainboy]

My 2 pennies worth when it comes to the car/travel allowance. It may save you some cash now, but if it is for example R 5k p/m, keep in mind that if this amount is added to your salary, your employer must contribute to your pension fund on the total salary  including that R5k p/m. Assuming they pay 50% and you pay 50% of the pf, combined you contribute over R8k annually to your pension fund. The employer thus also saves by not having to fork out that extra wad of cash every month by loading your salary with all sorts of allowances.

Bliksem -good point there. In fact, with my pension, I give 33% and the employer 'donates' another 66%. So the higher my salary, the more they have to fork out. He he (suckers!!!!)

Also- sitting in the sauna last night, a buddy (who's a financial dude at a bank) suggested I could sell my cage, use the funds as an investment (or put it in my bond,which i dont have yet), and buy another vehicle of similiar value,then pay it off as per normal. I wont view this as additional expenditure since I'll have the cash of the cage sale with me. Then I'll still keep the tax man happy (and get moola back as I usually do). Yes- I'l pay interest on the new purchase (but I should get a good rate) but should also get some returns on whatever I put the cash into.

I got 4 weeks to explore all options..........

[LostDOG]

I cant really see the sense in that. Although I am by no means a financial guru. I would strive to become debt free. The payment that I would normally make on a car, I would put into my new bond. When the car is really no longer serviceable I would sell it, draw a bit from the bond "saving" and have a reduced payment or shorter term on the new car. After a couple of years, even a nice car will no longer need to be financed, if you dont change cars frequently, say 8 year cycles.

My 2c today.

[Doggone]

  Anyone that tells you that you can save money by spending cash on a vehicle and getting a tax deduction has OBVIOUSLY been to the same school of logic that drives ladies (my wife included) to believe that they actually save by buying items at a sale.......even when they didnt actually need them.   

When a tax advisor tells you that you will 'save' on tax. He actually means that you will have a lower tax bill.

This does not imply that you are saving any money at all. It only means that funds that have been over-allocated to a vehicle allowance, and cannot be justified in terms of your vehicle claim, can lead to less of a tax claim against you, if you have a higher tax deductible expense amount. The catch is that you have to spend it first.

Now if you didnt spend it at all .... and paid 40% tax.. You would still have 60% left. If you spent this on a new car you didn't need, you will have to jusify to yourself that the 60% saving you could have had is a fair trade for the smell and feel of the new vehicle. After all it is an emotional purchase.

  HOWEVER, in my home,  Bikes and Sales have been declared no-go areas by myself and SWAMBO . We consider this our don't ask, don't tell policy. And it allows peace in the home!!

[mountainboy]

Dont even get me started on emotional purchase's.

I need to apply my mind logically.

Facts are :
1- I dont need a new car
2- I still have 4yrs on the bike
3- I'm bliksem scared of the taxman
4- I want a 250cc dirt bike, 690 KTM, 800/1200GS, all parked at my mountain cabin somewhere in the cedarberg,with snow on the peaks

Now really - is that too much to ask!!!

Told you -dont get me started on emotions 

[mountainboy]

oh - and a shark with a freaking lazer beam attached to its head!!