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Month: March 2016

WHO IS TO BLAME?

WHO IS TO BLAME?

A3Emily and Nathan were a happily married couple in their early thirties with two minor children. Emily was a stay at home mom and Nathan was the breadwinner of the family. The family decided to take a vacation in Sun City, which ended tragically when Nathan was fatally injured on a Valley of the Waves ride. Who was to take care of the family now that Nathan was no longer there and who was to pay the price for the family holiday that ended in a tragic loss?

If the question of negligence is hanging in the air then the obvious word to pop into one’s mind would be that of delict. In Kruger v Coetzee 1966 (2) SA 428 A 430E-G the formulation for negligence was established by Holmes in two steps:

(a) a diligens paterfamilias in the position of the defendant –

(i) would foresee the reasonable possibility of his conduct injuring another in his person or property and causing him patrimonial loss; and

(ii) would take reasonable steps to guard against such occurrence; and

(b) the defendant failed to take such steps.

In the case of Za v Smith (20134/2014) [2015] ZASCA 75 (27 May 2015) the father and breadwinner of the family died in a tragic accident while on vacation at a mountain resort close to Ceres, Western Cape, after falling off a sheer precipice (a steep rock or cliff). The wife of the deceased took the matter to the Supreme Court of Appeal, who considered three elements, namely wrongfulness, negligence and causation.

The background facts were taken into account, namely the fact that the park was used for recreational purposes for the public upon paying an entry fee. Furthermore, the 150 metres gorge drop where the deceased fell to his death was not visible, especially in snowy weather, nor were there any signs of warning.

Wrongfulness:

The court a quo did not find the Respondents to be wrongful as they did not have the duty to warn guests of the danger that was blatantly apparent to them. However, in the abovementioned case it was reiterated that ”the test for wrongfulness is whether it would be reasonable to have expected the defendant to take positive measures, while the test for negligence is whether the reasonable person would have taken such positive measures; confusion between the two elements is almost inevitable. It would obviously be reasonable to expect of the defendant to do what the reasonable person would have done. The result is that conduct which is found to be negligent would inevitably also be wrongful and visa versa.”[1]

If the abovementioned case is taken into consideration then Emily would most likely be successful in her application for compensation for herself, as well as in her capacity as mother of the two minor children, if it is found that Sun City Holiday Resort was negligent and wrongful and had causation.

[1] Za v Smith (20134/2014) [2015] ZASCA 75 (27 May 2015)

This article is a general information sheet and should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your attorney for specific and detailed advice. (E&OE)

DIFFERENCES BETWEEN PUBLIC AND PRIVATE SCHOOLS IN SOUTH AFRICA

DIFFERENCES BETWEEN PUBLIC AND PRIVATE SCHOOLS IN SOUTH AFRICA

A2In terms of Section 5 (3) (a) of the South African Schools Act No 84 of 1996 no learner may be refused admission to a public school on the grounds that his or her parents is unable to pay or has not paid the school fees as determined by the Governing Body. However, this Act does not make provision for independent “private” schools with regard to fees.

Section 5 (3) (a) of the South African Schools Act No 84 of 1996 has incorporated Chapter 2 Section 29 (1) (a) of the Constitution of the Republic of South Africa 1996 in terms of which everyone has the right to basic education. Therefore no child can be sent home or refused to participate in certain activities or sports due to arrears school fees[1]. Public schools must provide for equitable criteria and procedures for the total, partial or conditional exemption of parents who are unable to pay school fees.[2] This means that should a parent find themselves retrenched during the third term of school, they can apply for subsidiary for the tuition of the last term and their child / children can continue their education.

The South African Schools Act[3] does not make provision for independent “private” schools. Private schools are governed by the Private Schools Act No 104 of 1986, which does not make any mention of arrears school fees and whether or not children are still allowed their right to basic education if their parents find themselves in a financial struggle. The Private Schools Act focuses more on the regulations of a school itself and how to become a private school.

The problem relating to this is the fact that the children suffer. At the time of entering their children into a private school, the parents are financially stable. However, what happens if a parent suddenly find him/herself retrenched? Furthermore, the above problem is aggravated by the fact that private schools are struggling to obtain funds from the Government for subsidies. Race-based inequalities in subsidies to independent schools have been eliminated since 1994. Since then, subsidy levels have differed somewhat per province. But extreme pressure on the non-salary components of provincial education budgets, especially in 1997/98 and 1998/99, has resulted in a sharp decline in the per learner value of independent school subsidies, and considerable uncertainty as to the future trend of independent school funding by provincial education authorities.[4]

[1] South African Schools Act No 84, Section 41 (7)

[2] South African Schools Act No 84 of 1996, Section 39(2) (b)

[3] South African Schools Act No 84 of 1996

[4] South African Schools Act No 84 of 1996: Rules and Regulations

This article is a general information sheet and should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your attorney for specific and detailed advice. (E&OE)

JOU EIENDOM SE NALATENSKAP-LÊER

JOU EIENDOM SE NALATENSKAP-LÊER

A4Johan en Susan se warmwatersilinder bars gedurende die vroeë oggendure.  Deur al die chaos om die stopkraan te kry en die kinders uit die water te hou, loop die soektog na die versekeringspolis uit op ‘n massiewe stryery.  Hoekom is al die los dokumente nie geliasseer nie?  Nou moet Susan deur al hulle persoonlike dokumente soek om die een te kry wat sy nou dringend nodig het.

Sou dit nie minder stresvol gewees het as al die huis se dokumente netjies en op datum op ‘n sentrale plek gehou word nie? Susan sou dadelik die nodige kontaknommers tot haar beskikking gehad het, terwyl Johan die stopkraan uitsorteer.

Waarom sit jy nie ‘n paar uur uit jou skedule in die komende maand om jou huis se nalatenskap-lêer te skep of jou bestaande lêer op datum te bring nie.

Indien jy van nuuts begin, koop ‘n ringlêer met sakkies of ‘n flipfile.  Elke afdeling in jou lêer sal dan in sy eie sakkie geplaas word en sodoende maklik op datum gehou kan word met die nuutste inligting.

Die volgende is items wat in die lêer gestoor kan word:

1. Inligtingsblad met die kontakbesonderhede van jou Prokureur, Makelaar, Elektrisiën, Loodgieter, Tuindienste, Huishulp en ander diensverskaffers sodat jy nie noodwendig na die toepaslike sakkie hoef te gaan indien jy slegs ‘n nommer benodig.
2. Afskrif / Oorspronklike Titelakte van jou eiendom(me) – hierdie dokument is nie net belangrik met die verkoop van jou eiendom nie, maar ook wanneer planne opgetrek word vir potensiële aanbouings
3. Besonderhede van jou Verbandrekening(e) oor jou eiendom(me)
4. Nuutste Huurkontrakte – waarby jy die huurder of verhuurder is
5. Afskrif van jou koopkontrak
6. Rekord van verbeteringe aangebring
7. Goedgekeurde bouplanne
8. Die nuutste weergawe van jou Korttermynversekeringspolis –  Versekering op jou huis en huisinhoud
9. Kewersertifikaat, Elektrisiteitsertifikaat, Loodgietersertifikaat, Elektrieseheining sertifikaat en Gas sertifikaat
10. Sekuriteitsmaatskappy se kontrak en kontakbesonderhede
11. Besonderhede van die swembad hersteldienste

Die lys is natuurlik nie uitgeput nie, maak die lêer jou eie en brei die lys uit om by jou unieke omstandighede aan te pas.  Die lys kan selfs ingewerk word by jou persoonlike nalatenskap-lêer, wat onder andere die volgende dokumente sal bevat:

1. Inligtingsblad met die kontakbesonderhede van jou Prokureur, Makelaar, Bankier, Dokter ens.
2. ‘n Afskrif van jou Identiteitsdokument
3. ‘n Afskrif van jou nuutste Testament – Die oorspronklike testament sal in veilige bewaring in jou Prokureur se kantore gehou word
4. Jou oorspronklike Huweliksertifikaat, Huweliksvoorwaardekontrak, egskeidingsbevel en skikkingsakte (indien van toepassing)
5. Die nuutste weergawe van alle Langtermynversekeringspolisse – bv. Lewensversekering, ongeskiktheidsdekking en verbandbeskermingsdekking
7. Besonderhede van jou begrafnispolis en byvoordele, asook ‘n lys van rekenings waarop jy dekking ingeval van sterfte het
8. Bewys van jou Aandeleportefeulje
9. Besonderhede van jou bankrekeninge – bv. Jou tjekrekening, kredietkaartrekening en spaarrekening.
10. Besonderhede van jou beleggings – bv. Beleggingsrekening by ‘n bank en uitkeerpolis
11. Bewys van enige bates met waarde bv. ‘n muntversameling of juweliersware
12. Motorvoertuigregistrasie dokumente
13. Jou geldige Televisielisensie
14. Jou selfoonkontrak; landlynkontrak en internetdiensverskaffer kontrak
15. Besonderhede van alle winkelrekeninge bv Edgars of House and Home
16. Nuutste korrespondensie vanaf die Ontvanger van Inkomste
17. Besonderhede van jou Pensioenfonds en -voordele
18. Trustakte en Magtigingsbrief van enige Trust waarby jy ‘n belang het
22. Rehabilitasiebevel
23. Enige skuldooreenkoms waar jy vir iemand anders geld skuld of hulle vir jou
24. Besonderhede van jou Mediesefonds en Mediese GAP Dekking
25. Munisipale rekening
26. Eskomrekening of koopkragstrokie
27. DSTV / MNET kontrak en kontakbesonderhede
28. Besonderhede van die tuindienste
29. Besonderhede van jou huishulp

Verder kan sommige van die bogemelde dokumente ook in elektroniese formaat gestoor word.  Jy kan dus jou lêer aanpas om uit beide harde kopieë (van die oorspronklike dokumente in jou besit bv. jou oorspronklike Titelakte) en elektroniese kopieë (van die dokumente wat aan jou per e-pos gestuur word bv. Jou versekeringspolis) te bestaan.  Onthou om gereeld rugsteun kopieë van die elektroniese lêer te maak en by die harde kopieë te stoor.

Ons daaglikse lewens het oorgenoeg onvoorspelbare uitdagings, moenie toelaat dat jou persoonlike administrasie verdere spanning in jou lewe veroorsaak nie.  Begin vandag en neem beheer oor jou administrasie, betrek sommer die kinders ook en voor jy weet is alles op datum en op ‘n maklik bereikbare plek.

Opgestel deur Riëtte Smuts

Hierdie is ‘n algemene inligtingstuk en moet gevolglik nie as regs- of ander professionele advies benut word nie. Geen aanspreeklikheid kan aanvaar word vir enige foute of weglatings of enige skade of verlies wat volg uit die gebruik van enige inligting hierin vervat nie. Kontak altyd u regsadviseur vir spesifieke en toegepaste advies.

YOUR PROPERTY’S LEGACY FILE

YOUR PROPERTY’S LEGACY FILE

A1John and Susan’s geyser burst in the early hours of the morning.  On top of all the chaos to find the water mains tap and to keep the children out of the water, trying to find the insurance policy ended in a massive argument.  Why are all the loose documents not filed?  Now Susan has to go through all of their personal documents to find the one she desperately needs.

Would it not have been less stressful if all the house’s documents were kept in a central location, neatly and up to date?  Susan would immediately have the necessary contact numbers at her disposal, while Johan sort out the water mains tap.

Why not put a few hours aside out of your schedule in the coming months to create your home’s legacy file or to bring your existing file up to date.

If you start from scratch, buy a ring file with plastic sleeves or a flip file.  Each section in your file will be kept in its own pocket and thus can easily be kept up to date with the latest information.

The following are items that can be stored in the file:

1. Information sheet with the contact details of your attorney, broker, Electrician, Plumber, Gardening, Domestic Worker and other service providers so that you do not necessarily have to go to the appropriate bag if you only need a number.
2. Copy / Original Deed of Transfer for your property(ies) – this document is important not only for the sale of your property, but also when plans are drawn up for potential additions.
3. Details of your mortgage bond account(s) on your property(ies)
4. Newest Lease Agreements – where you are the tenant or the landlord
5. Copy of your Deed of Sale
6. Record of any improvements to the property
7. Approved building plans
8. The latest version of your Short Term Insurance Policy – Insurance on the building and its contents
9. Beetle Certificate, Electrical Compliance Certificate; Plumbing Certificate, Electrical Fence Certificate and Gas Certificate
10. The Contract and contact details of your Security Company
11. Details of the swimming pool repair services

The list is not exhausted, make the file your own and expand the list to suit your unique circumstances.  The list can even be incorporated into your personal legacy file, which will among other things, contain the following documents:

1. Information sheet with the contact details of your attorney, broker, banker, doctor etc.
2. A copy of your Identity Document
3. A copy of your latest Will – The original will be kept in a safe place in your attorney’s offices
4. Your original Marriage Certificate, Antenuptial Contract, Divorce Order and Settlement Agreement (if applicable)
5. The latest version of all Long-term insurance – eg. Life insurance, disability insurance and mortgage protection cover
7. Details of your funeral policy and benefits, as well as a list of accounts on which you have cover in case of your death
8. Proof of your Equity Portfolio
9. Details of your bank accounts – eg. Your checking account, credit card and savings account.
10. Details of your investments – eg. Investment Account at a bank and endowment policy
11. Proof of any assets of value eg. A coin collection or jewellery
12. Motor Vehicle Registration Documents
13. Your Valid Television License
14. Your cellular phone contract; land line contract and internet service provider contract
15. Details of all retail accounts eg Edgars or House and Home
16. Latest correspondence from the Receiver of Revenue
17. Details of your Pension Fund and -benefits
18. Trust Deed and Letters of Authority of any Trust in which you have an interest
22. Rehabilitation Order
23. Any debt agreement where you owes someone money or where they owes you
24. Details of your Medical Aid and Medical GAP Cover
25. Municipal Account
26. Escom Account or proof of pre-paid electricity
27. DSTV / MNET Contract and contact details
28. Details of your garden services
29. Details of your Domestic Worker

In addition, some of the above documents can also be stored in electronic format.  You can adjust your file to consist of both hard copies (of the original documents in your possession, eg. Your original Deed of Transfer) and electronic copies (of the documents that you receive via e-mail eg. your insurance policy).  Remember make back-up copies of the electronic files on a regular basis and store same with the hard copies.

There are more than enough unpredictable challenges in our daily lives, do not let your personal administration cause further tension in your life.  Start today and take control of your administration, you can even involve the kids too, and before you know it, everything will be up to date and in an easily accessible location.

Compiled by Riëtte Smuts

This article is a general information sheet and should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your attorney for specific and detailed advice. (E&OE)

‘N GIDS TOT EKSEKUSIEVERKOPINGS

‘N GIDS TOT EKSEKUSIEVERKOPINGS

A4_Mar‘N Eksekusie verkoping is ‘n openbare veiling gehou deur die balju van die hof. ‘n Vonnisskuldeiser het ‘n hofbevel nodig om beslag te lê op ‘n bate om sodoende dit later te verkoop. Laasgenoemde vonnis kan slegs uitgevoer word deur die balju te stuur om beslag te lê op die eiendom van die vonnisskuldenaar. Geregtelike beslaglegging van eiendom, of dit nou roerende of onroerende eiendom is, beteken dat die balju ‘n inventaris van die bates van die skuldenaar opstel en hierdie bates mag nie van die perseel verwyder of vervreem word nie. Dit gee die skuldenaar ‘n geruime tyd om te probeer om die skuld te delg voordat die balju, gelas deur die prokureurs vir die eksekusieskuldeiser, die aangehegte eiendom na ‘n plek van veiligheid verwyder.Sodra die bates verwyder is, moet die prokureurs vir die eksekusieskuldeiser reël vir ‘n eksekusieverkoping, meer algemeen bekend as ‘n openbare veiling.

‘n Balju se kommissie op ‘n eksekusieverkoping word soos volg saamgestel :

  1. 6% op die eerste R30 000.00 (plus BTW);
  2. 5% op die balans van die prys.

Die minimum kommissie betaalbaar is R440.00 (plus BTW) en die maksimum is R8 750.00 (BTW uitgesluit). Dit is belangrik om daarop te let dat die kommissie deur die suksesvolle koper by die veiling betaal word en is gebaseer op die koopprys soos hierbo uiteengesit.

Die hofreëls bepaal dat die verkope by wyse van openbare veiling moet wees, maar geen voorsiening word gemaak dat billike markwaarde bereik moet word deur sulke verkope nie. Roerende en onroerende eiendom kan gekoop word by veilings teen verminderde, soms ver onder markwaarde, pryse. Die eiendom bereik dikwels nooit die waarde wat dit sou bereik in die ope mark nie. Dit is grootliks te wyte daaraan dat die verkope in teregstellings net deur die balju van die hof. Die Verweerder word nie toegelaat om te probeer om die markwaarde van sy / haar bate te verhoog deur die verkoop van daarvan in die ope mark nie.

Verder is daar geen verpligte reserwe prys vir teruggeneemde bates wat by openbare veiling verkoop word nie. ‘n Reserweprys is die minimum prys waarteen ‘n bate verkoop mag word.

Die feit dat daar geen verpligte reserwe prys is nie is die afgelope tyd ‘n warm onderwerp, veral met die koms van die era van verbruikersbeskerming. Veilings is vir die grootste gedeelte nie mededingend nie. Dit is waar dat slegs die winskoop jagter baat uit openbare veilings. Die vonnisskuldeiser word dikwels in die posisie gelaat dat die vonnisskuld nie ten volle ingevorder word nie. Die vonnisskuldeiser het in so ‘n geval steeds ‘n eis teen die skuldenaar vir die uitstaande bedrag in terme van die hofbevel.

Daar is duidelik ‘n tekort in die proses van die verkoop van bates by wyse van openbare veiling. Hierdie tekorte moet deur die howe aangespreek word om in lyn te kom met verbruikersbeskerming in Suid-Afrika. Dit is gemene saak dat die skielike veranderings in ekonomiese toestande die lewens beïnvloed van die mees ekonomies benoude mense in ons land.

Hierdie is ‘n algemene inligtingstuk en moet gevolglik nie as regs- of ander professionele advies benut word nie. Geen aanspreeklikheid kan aanvaar word vir enige foute of weglatings of enige skade of verlies wat volg uit die gebruik van enige inligting hierin vervat nie. Kontak altyd u regsadviseur vir spesifieke en toegepaste advies.

A GUIDE TO SALES IN EXECUTION

A GUIDE TO SALES IN EXECUTION

A3_MarA sale in execution is a public auction held by a sheriff of the Court. To repossess and sell an asset, an execution creditor needs to obtain a court order. Last mentioned judgment can only be executed by sending the sheriff of the court to attach the property of the debtor. Judicial attachment of property, be that movable or immovable property, means that the sheriff draws an inventory of the assets of the debtor and those attached assets may not be removed from the premises or alienated. This gives the debtor some time to try and settle the debt before the sheriff is instructed by the attorneys for the execution creditor to remove the attached property to a place of safety.Once the assets have been removed, and are in the custody of the sheriff, the attorneys for the execution creditor arrange for a sale in execution, more commonly referred to as a public auction.

A sheriff charges commission on a sale in execution made up as follows:

  1. 6% on the first R30 000.00 (plus VAT);
  2. 5% on the balance of the price.

The minimum commission payable is R440.00 (plus VAT) and the maximum is R8 750.00 (excluding VAT). It is important to note that the commission is payable by the successful buyer at the auction and is based on the purchase price as set out above.

The Rules of Court stipulate that these sales have to be by way of auction but no provision is made for the fact that fair market value must be achieved. Movable and immovable property can be purchased at greatly discounted, sometimes well below their market value, prices at sales in execution. The property often never reaches the value it would have had it been sold in the open market. This is largely due to the fact that sales in executions may only be held by the sheriff of the court. The execution debtor is not allowed to attempt to increase the market value of his/her asset by selling same in the open market.

Furthermore there is no mandatory reserve price for repossessed assets sold at a public auction. A reserve price is a price that may be placed on an asset on auction, effectively meaning that that same asset may not be sold for less than the reserve price.

The fact that there is no mandatory reserve price has been a hot topic in recent years, especially with the advent of the era of consumer protection. Auctions for most part remain anti-competitive. It is true that no one but the bargain hunter gains from these public auctions. The execution creditor is often left without the judgment debt being recovered in full. The judgment creditor still has a claim for the outstanding amount in terms of the judgment.

There are clear short falls in the process of selling assets by way of public auction. These shortfalls need to be addressed by the courts to fall in line with consumer protection in South Africa. It is common cause that sudden changes in economic conditions vastly influence the lives of the most economically distressed in our country.

This article is a general information sheet and should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your attorney for specific and detailed advice. (E&OE)

 

HOW TO REGISTER AN INTER-VIVOS TRUST

HOW TO REGISTER AN INTER-VIVOS TRUST

A2_MarIn South Africa there are mainly two types of trusts that are registered. An inter-vivos trust can be created between living persons, and a testamentary trust is created in the will of a deceased.An inter-vivos trust is registered at the office of the Master of the High Court in whose area of jurisdiction the main assets of the trust are or will be held.

The first step is to draw up a valid trust deed. A trust deed is a contract between the founder of the trust and the trustees, for the benefit of a third party or parties, known as the beneficiaries. In terms of the trust deed, the founder agrees to transfer certain assets to the trustees of the trust for the benefit of the beneficiaries. The trust deed must stipulate who the first trustees of the trust are going to be. In many instances the Master will insist on at least one independent trustee to be appointed. This means that the independent trustee will receive no benefit from the trust assets apart from the specified and reasonable trustee remuneration. The beneficiaries must be specified in the trust deed, as well as their entitlement to either the capital of the trust, the income of the trust assets, or both.

A trust deed is a valid contract and therefore subject to all applicable laws. Furthermore, there are significant tax, financial and other consequences of being involved in a trust, whether as trustee, founder or beneficiaries.  Therefore it is imperative to seek professional advice when drawing up this deed.

The duly signed and witnessed trust deed must be submitted to the Master of the High Court, together with the completed and signed Acceptance of Trusteeship for all trustees and certified copies of their identity documents. This Acceptance of Trusteeship states the basic information of the trustees that the Master requires, as well as certain declarations made by the trustee. If the Master requires the trustees to furnish security, proof of the bond of security by those trustees must be provided to the Master when the trust is registered. Form JM21 sets out certain requirements and information that must be supplied to the Master together with the other documents set out in this paragraph. This information include details on the professions or business occupation of the trustees to be registered, any previous experience that these trustees might have in the administration of trusts, the name and branch of the bank where a bank account will be opened for the trust, and so forth.  An original undertaking by an auditor or accounting officer must accompany form JM21. Lastly, proof of the payment of the prescribed fee of R100 must be submitted.

On receipt of the above documents in accordance with all the requirements, the Master will issue a Letter of Authority to the trustees. The trustees may then act on behalf of the trust.

Any amendments to the original trust deed must be placed on record with the Master of the High Court where the original trust deed is on record.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your attorney for specific and detailed advice. Errors and omissions excepted (E&OE)

FRINGE BENEFITS AND INCOME TAX: CAN EMPLOYEES STILL BENEFIT FINANCIALLY FROM FRINGE BENEFITS?

FRINGE BENEFITS AND INCOME TAX: CAN EMPLOYEES STILL BENEFIT FINANCIALLY FROM FRINGE BENEFITS?

A1_MarIn the past there were definite financial gains attached to certain fringe benefits granted by an employer to employees. There were also quite a few loopholes which were abused by a number of taxpayers. As a result SARS has clamped down on the tax treatment of fringe benefits by changing the Tax Laws and closing the loopholes.SARS started taxing the cash value of fringe benefits. The cash value of a fringe benefit is equal to the cost of the benefit to the employer. If the asset depreciates over time, the cash value will have to be re-considered each year, otherwise the employee will be paying too much tax.

The following fringe benefits granted by an employer to an employee will be taxable in the employee’s hands at the cash value as set out below:

  • Private use of a cellphone or computer equipment, except if the private use of the asset is incidental to the business use thereof and the employee uses the asset more than 50% for the employer’s business.

The onus to prove that the asset is required to be used outside of the workplace by the employee and mainly for business purposes, rests on the employer and the employee.

  • Company car:

The cash value of the company car fringe benefit will be calculated with reference to the original cost of the vehicle to the employer.

There are special tax considerations to be taken into account in the following circumstances:

  1. A vehicle not acquired by the employer in a sales or exchange transaction;
  2. Maintenance plans;
  • Employee contributes towards the cost of the vehicle;
  1. Employee used the vehicle for a period shorter than a month; or
  2. Employee is regularly required to use the motor vehicle for the performance of his/her duties outside their normal working hours.
  • Giving an asset to an employee for free or for less than its actual value:

The cash value of the fringe benefit will be the value of the asset less any consideration paid by the employee.

  • Low interest or interest-free loans:

The fringe benefit will have a cash value of interest calculated at the SARS official tax rate and be reduced by any interest paid by the employee.

  • Subsidies in respect of loans:

The cash value will be equal to the cost of the subsidy to the employer in respect of any interest and/or capital repayments.

  • Employer subsidies to pension funds, provident funds, etc.:

The cash value will be the amount of the subsidy paid by the employer.

  • Employer contributions to insurance policies where the employee or a relative of the employee will be benefitted by the policy:

The cash value will be equal to the amount of the premiums paid by the employer.

  • Medical aid contributions paid on behalf of an employee:

The cash value is equal to the amount paid by the employer.

  • Payment or refund of medical expenses incurred by the employee or his immediate family:

The cash value is equal to the cost to the employer.

  • Debt paid on behalf of an employee or releasing an employee from an obligation to pay a debt:

The cash value is equal to the amount paid by the employer or the amount of the debt of which the employee has been released.

There are a number of exceptions where no value will be placed on the payment or the release of the debt. Please contact your tax practitioner for more information.

  • Free or cheap services:

The cash value will be calculated as the cost of the service to the employer less any amount paid by the employee.

  • Free meals, refreshments or meal vouchers:

The cash value of this benefit will be equal to the cost to the employer less any amount paid by the employee.

It is important to ensure that an employee is taxed on the correct amount for a fringe benefit. Taxing an employee on an amount higher than the cash value of a fringe benefit will result in the employee paying too much tax. Taxing the employee on an amount lower than the cash value, thus deducting too little Employees’ Tax will cause the employer to become liable for fines and penalties from SARS.

As can be seen from the above, an employee will be taxed on his/her cost to the employer and it is fast becoming irrelevant whether an employee’s package is structured in a certain way to reduce income tax.

This article is a general information sheet and should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your attorney for specific and detailed advice. (E&OE)

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