Two fringe benefits that don’t give the taxman a slice

As an employee, all nonmonetary benefits that you receive from your employer — commonly known as fringe benefits — are taxable subject to certain exclusions. Common examples of taxable fringe benefits include the right to use a car, a housing subsidy, the payment of residential accommodation and medical scheme contributions.

However, not all fringe benefits are subject to taxation. Two common examples that are worth looking into in more detail are the uniform allowance and relocation costs. Both of these may be exempt from taxation if certain requirements are met.

Uniform allowance

An employer may provide you, as an employee, with a uniform, or provide you with an allowance to purchase a uniform. Such a provision would generally be regarded as a fringe benefit and be subject to taxation in the hands of the employee.

However, if certain requirements are met, this provision for a uniform may be nontaxable for the employee. The requirements are very stringent:

● It must be a condition of employment that the employee must wear the special uniform while on duty — that is, if the employee fails to wear the uniform they may be subject to disciplinary action; and

● The uniform must be clearly distinguishable from ordinary clothing and must display the emblem or logo of the employer.

If the uniform meets these requirements, you may receive a uniform from your employer or money to buy such a uniform, and this benefit will be exempt from tax in your hands.

Relocation allowance

If you are transferred at the insistence of your employer and your employer bears the costs of the relocation (your employer either paid the costs directly or reimburses you for the costs you paid), the benefit you receive will be a nontaxable one. The amount will qualify as exempt income provided that you are required to change your residence.

The type of costs that will qualify for this exemption are as follows:

● Transportation costs from previous residence to new residence;

● The cost of selling your previous residence — for example, the estate agent fee;

● The costs of obtaining a new residence — the bond registration fees and transfer duty;

● The renting of temporary accommodation for up to 183 days;

● New school uniforms; and

● Motor vehicle registration fees.

This exemption also applies if you start a job at a new employer and your new employer pays your relocation costs. You must still have changed your residence to qualify.

Both the uniform allowance and the relocation costs should be listed under code 3714 on your IRP5 in order for the amounts to be treated as nontaxable.

The uniform and relocation allowances are the most common nontaxable fringe benefits, but to enjoy them they have to meet the requirements.

Most of the fringe benefits you receive from your employer are taxable, meaning employers have to pay more to give you a meaningful after-tax reward for your good work.

Baines is the author of How to Get a SARS Refund and a tax consultant at Mazars