Companies often provide their loyal and long-serving employees with an award of some form or another at certain times during their tenure with the company.
The more well-known (and often joked about!) award is that of the traditional “gold watch”.
In the past, the only item that qualified for a tax benefit was, for example, the “gold watch”, i.e. an asset of some form.
If the value of this award was above R5,000 then the portion above R5,000 was deemed to be a taxable benefit and hence had to be taxed as such – i.e:
- If the value of the asset was R10,000,
- then the employee would be liable for tax on R5,000.
In recent years there has been some lobbying to get this amount increased to something more in line with current costs – but no luck so far. Up to 2009, the maximum non-taxable value was R3,000, and it was thereafter increased to R5,000. So, the current status is that there certainly is no potential increase in this value on the horizon, so good luck with finding that gold watch for less than R5,000!!
These days, companies are attempting to become a bit more creative when it comes to long service awards, and the types of awards provided often include things such as:
- The opportunity to use a company asset. For example, the company owns a fleet of expensive and exotic vehicles, and the employee gets to choose one to use for a weekend – [par 6(4)(d) of the Seventh Schedule]
- The provision by the company of a cheap or free service – for example, the company is in the carpet cleaning business and cleans all the carpets in the employees’ house for free or at a hugely discounted price – [par 10(2)(e) of the Seventh Schedule]
- The company is in the business of providing accommodation in exotic locations and provides the employee with the opportunity to visit one of these at no cost, or allows the employee to make use of the company holiday home at no cost.
- The company decides that the employee would benefit far more from a straight cash award, or is even given a series of meal/shopping vouchers.
- The company provides the employee with an asset – i.e. the acquisition of an asset at less than the actual value – [par 5(2)(b) of the Seventh Schedule]