sars and your allowance
22 May 2008

Question:
I just started a new job and receive a R3500 car allowance.

What are the implications if I do not buy a new car or choose to use that money to pay off the car that my husband and I share, but bought in his name?

Answer:
A car allowance is just another way of structuring your salary. In the old days there was some benefit to receiving a car allowance in terms of tax relief, but not anymore.

The cost of financing the car will wipe out any tax savings so it’s a good idea to use the money to pay off your husband’s car and thereby greatly reducing the interest charges.

However, you need to make sure that your job does not require you to have a car. They will not be very impressed if they need you to go out and you don't have access to a car.

Owning only one car saves you a lot of money in insurance, maintenance and petrol so it’s a bonus if you can get away with it.

Iona Minton, http://personalfinance.iafrica.com