Motor Vehicle Allowance Reimbursement20.10.2014

Question

Our client owns a European car. He is a shareholder of Company A and receives a Motor Vehicle Allowance Reimbursement of $2,000 per month from the company to cover the lease and any motor vehicle expenses.

Do we need to ensure there is some sort of invoice every month for this? Or, do we need supporting documentation to ensure the motor vehicle allowance reimbursement does not become subject to PAYE.

Answer

The Company can pay the shareholder-employee a non-taxable motor vehicle allowance to the extent that the allowance reimburses the employee for business use of the motor vehicle.

In order to demonstrate that the monthly allowance amount of $2,000 is reasonable the shareholder-employee should keep a log book for 3 months to determine the business use as a proportion of total travel.

To the extent the allowance exceeds reimbursement for monthly business use that portion will be taxable.

The reimbursement could factor in petrol, maintenance .(depending on the nature of the lease) as well as the monthly lease amount.

No invoice should be issued by the shareholder.

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Carried Forward Tax Losses18.09.2014

Question
Our client is inheriting a company from a friend who has recently passed away. The deceased shareholder owned 100% of the company.

The company has tax losses. Will these losses be forfeited due to the shareholding change?

Answer
No. There is no breach of shareholder continuity.

The death of a shareholder does not affect the shareholder continuity requirements that must be met by companies to enable carried forward tax losses, imputation and dividend withholding payment credits, etc.

For continuity purposes, where a person has acquired shares as a beneficiary or trustee under the will or on the intestacy of a deceased person, the beneficiary or trustee is deemed to have acquired the shares on the date the shares were acquired by the deceased person and to have held them since that time.

Accordingly, no breach of continuity occurs as a result of the shareholder’s death.

Fringe Benefit Tax on Motorcycles12.09.2014

Question
We have a client who wants to bring a Single-Seat Motorcycle onto the accounts of the company.

Will this attract Fringe Benefit Tax on the Motorcycle if brought into the business, or will it be exempt from FBT?

Answer
A motorcycle is considered a vehicle for FBT purposes. Therefore, when owned by a company the motorcycle will be subject to FBT if there is a private use component.

Take a look at other posts on similar subjects

Is Company Branding Expenditure Deductable24.07.2014

Question
Our client, a company, has recently incurred expenditure in relation to developing a company logo and other branding related costs, such as letterheads, business cards, website, brochures and email signatures.

Is this expenditure deductible?

What accounting treatment would you recommend – expense or capitalise?

Answer
In our view, the expenses incurred in developing the logo and the email signature should be treated as intangible assets and should therefore be capitalised.

The expenses are not tax deductible in the normal course of business because the benefit is potentially ongoing.

We note that design concepts, artwork, logos and branding are not depreciable property as they do not have a fixed life and are not expected to decline in value.

However the cost to actually print the letterhead and business cards could arguably be deducted as an advertising expense