Finance Minister Trevor Manuel’s 2005/06 Budget speech on Wednesday included some tax relief, but motorists will have to contend with a higher fuel levy and new measures intended to stamp out the abuse of motor vehicle allowances.

Finance Minister Trevor Manuel's 2005/06 Budget speech on Wednesday included some tax relief, but motorists will have to contend with a higher fuel levy and new measures intended to stamp out the abuse of motor vehicle allowances.


Delivering the Budget in the national assembly, Manuel said individual taxpayers would save R6,8-billion to compensate for inflation and real tax relief in all income groups, but about 60 percent of the total would go to those earning below R200 000 a year.

However, from April 6, motorists will need to pay 10 cents more per litre of petrol or diesel, the finance minister said in his address to the National Assembly on Wednesday.

Manuel said that of the 10 cents, five would be added to the coffers of the Road Accident Fund, while five cents would go towards the general fuel levy. He said adjustments were in line with inflation and would help raise about R950-million in additional revenue in the coming financial year.

Diesel fuel concession refunds allocated to producers in the agriculture, mining and forestry sectors will be increased. However, the South African Revenue Service and the National Treasury will review the diesel refund system to identify and eliminate potential abuse.


In addition, Manuel's speech included details of a revised approach to the calculation of "deemed business travel" expenses against a car allowance.


He said the changes would reduce the tax benefit associated with deemed motor vehicle use calculations, particularly if the vehicle cost more than R360 000.


The situation now, according to a document accompanying Manuel's speech, meant car allowances were granted to employees not for commercial reasons but for tax reasons.


The first proposed change relates to the deemed distance formula. The deemed private distance will be increased to 16 000km for 2005/06 and to 18 000 km for 2006/07.


The second relates to the deemed cost table, which will be updated to reflect a residual value of 30 percent of the original purchase price after five years. It will simultaneously be updated to reflect current fuel and maintenance costs.


In addition, the maximum value of a motor vehicle for purposes of determining the cost of business travel for a vehicle allowance will be capped at R360 000.


Thus, an individual with a R1-million vehicle will use the same costs in the deemed cost table as an individual with a R360 000 vehicle.


Further, to pre-empt a switch to company cars over the short to medium term, the deemed value of a company car will be increased from 1,8 per cent a month to 2,5 per cent a month with effect from March 1 next year.


The deemed value of a second or more company cars will remain at four percent a month, reported yesterday afternoon.

Original article from Car