As an employer, it is important to offer your employees a competitive benefits package to attract and retain top talent. However, many employers overlook the tax implications of these benefits.
By offering tax-efficient employee benefits, you can help your employees reduce their tax liability while still providing them with valuable perks.
In this article, we will explore some of the most popular tax-efficient employee benefits in South Africa.
What are Tax-Efficient Employee Benefits?
Before we dive into specific tax-efficient employee benefits, it is important to understand what we mean by the term.
Tax-efficient employee benefits are those that provide employees with a financial benefit that is either partially or fully exempt from tax.
This can include benefits such as medical aid, retirement annuities, and travel allowances.
By offering these benefits, you can help your employees save money on their taxes while still providing them with valuable perks.
Tax-Efficient Employee Benefits in South Africa
There are many different tax-efficient employee benefits available in South Africa. Here are some of the most popular options:
Medical aid is one of the most common employee benefits in South Africa. Not only does it provide employees with access to quality healthcare, but it can also be tax-efficient.
Contributions made to a medical aid scheme are tax-deductible up to a certain limit.
This means that your employees can reduce their taxable income by contributing to a medical aid scheme.
Retirement annuities (RAs) are another popular tax-efficient employee benefit. Contributions made to an RA are tax-deductible up to a certain limit, which can help your employees save money on their taxes. RAs also provide your employees with a valuable retirement savings vehicle.
If your employees are required to travel for work, you can offer them a tax-efficient travel allowance. The first 18,000 km per year are tax-free, and any additional travel is taxed at a lower rate.
This can help your employees save money on their taxes while still being able to travel for work.
Group Life Cover
Group life cover is another popular employee benefit that can be tax-efficient. Premiums paid for group life cover are tax-deductible, and the payout received by the employee’s beneficiaries is tax-free.
This provides your employees with valuable life insurance coverage while also being tax-efficient.
If your employees are furthering their education, you can offer them a tax-efficient education assistance benefit. The first R15,000 per year is tax-free, and any additional assistance is taxed at a lower rate.
This can help your employees save money on their taxes while still being able to further their education.
If you offer your employees subsidized loans, you can make these tax-efficient by charging them a lower interest rate than the market rate.
The difference between the market rate and the interest rate charged is considered a taxable fringe benefit, but it is taxed at a lower rate.
This can help your employees save money on their taxes while still being able to access affordable loans.
There are many other tax-efficient employee benefits that you can offer your employees, including:
- Pension/provident fund contributions
- Disability cover
- Income protection cover
- Funeral cover
- Housing subsidies
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