An employee whose employer provides a company vehicle discovers that their take-home pay has dropped significantly because the fringe benefit tax was never explained or transparently calculated.
Premiumintermediate8 minutes
The Situation
What They Said
“Please show me the fringe benefit calculation on my payslip — the retail value of the vehicle, the percentage applied under the Seventh Schedule, and the resulting monthly determined value — so I can verify that my PAYE deduction is correct.”
Three months ago you were delighted when your employer gave you a company car as part of your remuneration. Now your take-home pay is significantly lower than before, even though your salary rate has not changed. When you ask payroll, they say only 'it is because of the car tax' and cannot show you any calculation. You are worried you might face a large SARS tax bill at year end if the fringe benefit is being calculated incorrectly.
The Fallacy
A Perk Has No Hidden Tax Cost to the Employee
Many employees accept company cars believing they are purely cost-free benefits. In reality, SARS treats private use of a company vehicle as taxable income added to your salary every month. Your employer is legally required to calculate this benefit correctly, include it in your gross income, and deduct the correct PAYE. If payroll uses the wrong vehicle value or the wrong percentage, you may either overpay monthly or face a large SARS liability at tax year end — and that liability is yours, not your employer's.
What the Law Says
Your Legal Foundation
Income Tax Act 58 of 1962
Seventh Schedule, Paragraphs 2(b) and 7 — Fringe benefits — private use of motor vehicle
“The Seventh Schedule provides that where an employer grants an employee the right of use of a motor vehicle, the private use of that vehicle constitutes a taxable fringe benefit. The determined value of the monthly benefit is calculated as 3.5% of the vehicle's retail value (or 3.25% if a maintenance plan is included). This determined value is added to the employee's gross income each month and taxed at their marginal rate through PAYE.”
Your employer must correctly apply the Seventh Schedule formula and reflect both the determined value and the resulting PAYE on your payslip. You have the right to request this breakdown in writing. If the retail value used is incorrect or the wrong percentage is applied, you can be overtaxed or face a SARS shortfall — both are your problem at year end.
What Scripture Says
God's Word on This
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“Give to everyone what you owe them: if you owe taxes, pay taxes; if revenue, then revenue; if respect, then respect; if honor, then honor.”
This scripture affirms that tax obligations are real and should be handled honestly by both employer and employee. Your employer must calculate and deduct the correct amount; you must maintain accurate records (like a logbook) to support any business-use claim at year end.
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What They'll Say Next
Common Counter-Arguments
After you respond, they may push back with these arguments. Members get the full rebuttal for each.
They might say: “The payroll team applies the 3.5% to the vehicle's original purchase price excluding VAT, rather than its full retail value including VAT, which makes the calculated benefit lower than it should be — and means you will have underpaid tax.”
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They might say: “You use the company car heavily for business travel but do not keep a logbook, so at year end SARS assumes 100% private use and you pay the full fringe benefit tax with no reduction.”
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Know Your Rights. Know Your Word.
389 South African law and Scripture scenarios — exact rebuttals, constitutional law, and Scripture. Practise out loud with audio. Free to start.