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How To Tax Cellphones In The Workplace

Let’s look at how this works in practice.

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South African businesses depend on mobile phones, computers and telecom services to keep their businesses running smoothly. Depending on whether the devices are employer- or employee-owned – as well as who pays for airtime and Internet access – this reality brings with it a range of implications for payroll calculations as well as the employee’s take-home pay.

In many cases, employers have adopted bring-your-own-device (BYOD) strategies to allow employees flexibility in choosing the devices and contracts that meet their personal and business needs. In this case, they might give employees a regular allowance for their costs or ask employees to claim their business expenses each month.

In other cases – though increasingly rare – employers take out the mobile or broadband contract in the business’s name and give employees access to a company-owned device.

The payroll department needs to look carefully at each of these scenarios to ensure that the business complies with tax regulations with the least effort, cost and risk.

The basic principle is simple: The use of the employer’s mobile device, or the provision of a communication service such as the internet or a telephone service, is tax-free if used for business purposes, but the personal use is taxable.

Related: Payroll Tax: 6 Things Small Business Owners Should Know

The difficult (and sometimes admin-intensive) part is separating personal from business usage so that personal use can be taxed as a fringe benefit.

Employer-owned devices

When the employer provides the employee with a device that is leased, rented or fully owned, personal use by the employee should be treated as a fringe benefit. The value of the fringe benefit is calculated as follows:

  • If the mobile device is leased or hired by the employer, it is valued as the amount of the lease or rental payments.
  • If the device is owned by the employer, 15% per annum of the lesser between the cost of the asset and the market value at the start of the period of use.
  • If the employee is granted the sole right of the use of the device over its useful lifetime (or over a major portion thereof), the cost of the mobile device on the date on which the employee was first granted the right of use.

Employers may deduct any amount spent by the employee on the maintenance or repair of the asset as well as their work usage from the fringe benefit valuation.

The good news is that if the employee uses the device mainly (more than 50%) for business purposes, there is no fringe benefit to declare.

Employer-provided communication services

When an employee has personal use of a communication service (home broadband, mobile internet, internet connectivity, voice lines etc.) provided by his or her employer, this should be treated as a fringe benefit. The initial value is the cost to the employer of providing the service.

Again, the fringe benefit has no value if the service is used mainly (more than 50%) for business purposes. This also applies to personal use of a telecommunications service made available at work, for example personal calls made from the office using the employer’s fixed line service.

Employee-owned device and communication services

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Employers generally compensate employees for business-related device expenditure by way of reimbursements (or advances) and allowances.

Reimbursement

  • Reimbursements of business-related expenditure are not taxable if the expenses are incurred on the instruction of the employer, and the employee provides the employer with proof of the expense. In the case of mobile devices, the proof would be in the form of an itemised billing statement.
  • The difficulty with the calculation of the reimbursement value of the business use of the mobile device is items such as free minutes and the fixed contract amount. Here’s an example of a calculation that SARS will accept:
    • Subscription: R600 per month (includes the mobile device and 500 free minutes per month)
    • Total bill: R600
    • February use: 150 minutes for business use, and 300 minutes for private use
    • February business use value: R600 x 150 / (150 + 300) = R200
  • Thus, the employee may be reimbursed up to R200 tax free. If more than R200 is reimbursed, the excess amount above R200 is taxable and must be reported on the tax certificate against code 3713 (taxable allowance). A valid reimbursement for business-related mobile expenses is not remuneration and is therefore not used for the calculation of SDL or UIF.

Related: You’re (Probably) Paying More Tax Than You Should

Allowance

  • If the employer is satisfied that the employee will incur business-related mobile expenses an allowance can be paid to compensate the employee for incurring the employer’s expense. The value of the allowance must be in line with the expected business use value. The allowance is remuneration and the full value is subject to PAYE, SDL and UIF.
  • Furthermore, no deduction may be claimed against this allowance on assessment, even if the employee is paid mainly (more than 50%) by way of commission. If the employer reimburses the employee for business calls above the allowance value, then this portion of the compensation is treated as a reimbursement.

Closing words

Companies spend a lot of time considering the technical and accounting aspects of the ownership and payment models they follow for communication devices and services. However, the implications for the payroll should not be neglected if a company is looking at implementing a BYOD strategy or reverting to an employer-owned approach.

As the global market leader of integrated accounting, payroll & HR and payment systems, we have become an indispensable business partner to the country’s Small & Medium Businesses.

For us, this isn’t just about providing use the smartest technology to reinvent and simplify business accounting and payroll, but also helping clients to navigate the tax and legal environment. That’s why we present our Mid-year Payroll Tax Update seminars to help entrepreneurs make sense of an increasingly complex landscape.

Entrepreneur Magazine is South Africa's top read business publication with the highest readership per month according to AMPS. The title has won seven major publishing excellence awards since it's launch in 2006. Entrepreneur Magazine is the "how-to" handbook for growing companies. Find us on Google+ here.

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(Infographic) Chevron South Africa Says Its B-BBEE Transformation Is A Driver Of Job Creation

Creating new Black entrants for 50% of its retail network; and channeling approximately 50% of its crude procurement through Black and Black Female-owned oil trading companies are just two great examples of how an integrated oil company can support South Africa’s socio-economic transformation objectives.

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  • 82% of the workforce are Black South Africans with 65% of top and senior management comprising of Black employees
  • Procurement, a major driver of B-BBEE strategy, aimed at creating entrepreneurs
  • Majority Black-owned Branded Marketers own 50% of Chevron’s Retail Network
  • R100 million provided towards Enterprise and Supplier Development.

Chevron South Africa’s executive chairman, Shashi Rabbipal, is strongly in favour of transformation in the oil and gas sector as a driver of job creation and value for the company and its various stakeholders.

According to Rabbipal, the company views transformation as a key value enabler for business, achieving a newly minted Level 2 against the revised Broad-Based Black Economic Empowerment (B-BBEE) Codes of Good Practice.

Rabbipal outlined that the company has harnessed its procurement capacity and its Branded Marketer network to create an environment where entrepreneurship can thrive in the energy sector.

The company said that creating new Black entrants for 50% of its retail network and channeling approximately 50% of its crude procurement through Black and Black Female-owned oil trading companies are two great examples of how an integrated oil company can support South Africa’s socio-economic transformation objectives.

Chevron South Africa’s Level 2 achievement is most impressive, given that it is based on the company’s full value chain which includes its Cape Town refinery and its national network of Caltex retail service stations.

Related: What Is BBBEE?

Transformation embedded in business strategy

“Our commitment to Transformation goes beyond compliance as we continue to seek opportunities which drive job creation and economic prosperity, cultivate mutually beneficial business relationships and demonstrate good business practice,” said Rabbipal.

The following examples illustrate actions Chevron South Africa has taken to deliver on the country’s Transformation objectives:

  • 82% of the workforce is Black, with 27% Black Female.
  • 90% of the Board Directors are Black South Africans, with 30% Black Females.
  • A flagship programme building capacity for Black unemployed youth living with disabilities has been implemented, with an intake of 66 learners to date.
  • 90% of procurement is with Black suppliers.
  • Approximately 50% of procured crude oil and petroleum products is through Black-empowered trading companies, of which roughly 35% are Black women-owned.
  • An Enterprise and Supplier Development programme has provided over R100 million in interest-free loans, credit lines and deferred marketing loans to designated B-BBEE beneficiaries within the procurement pipeline.
  • 50% of the retail network is owned by Black entrepreneurs through the Caltex Branded Marketer Programme, with average Black ownership of 73%.
  • Social investment partnerships impacting 50,000 direct beneficiaries each year in the areas of health, STEM education and economic development.

“We conduct business in a socially responsible and ethical manner, leveraging our ability to benefit the communities where we work. As such, Transformation is more than a scorecard to us and is deeply embedded in our business strategy,” Rabbipal concludes.

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Blu Blood’s Fearless Leader Ranked Among 2018 Standard Bank Top Women Award Finalists

Having pioneered leading lifestyle and event management company, Blu Blood, in 2008, Shaaista Khan Osman celebrates the company’s 10 years in business with two excellence nominations in the upcoming 2018 Standard Bank Top Women Awards taking place on Thursday, 23 August at Emperors Palace.

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Cemented as South Africa’s leading and pre-eminent initiative to honour the achievements and advocate the advancement of gender empowerment, the Standard Bank TOP WOMEN awards celebrates their 15 year anniversary gathering South Africa’s most accomplished businesswomen and organisations accelerating gender transformation in the workplace.

Shaaista Khan Osman’s commitment and successes for Blu Blood and the soon-to-be-launched World Women’s Network has earned her the recognition as a frontrunner of gender empowerment in two categories: TOP BUSINESSWOMAN OF THE YEAR and TOP GENDER EMPOWERED COMPANY IN INNOVATION THROUGH TECHNOLOGY.

Commenting on the achievement of reaching Finalist status, Shaaista comments:

“I was truly taken aback when I received the news of the nominations. I am humbled because it is our strong and dedicated business family unit that has contributed to my successes and of which I am in awe.  I am honoured to take on this great responsibility of being a voice in the progression of women in business alongside other likeminded and courageous women.”

Starting out with a humble upbringing as the youngest of six children, Shaaista’s story is a true testament of hard work, dedication and sincerity.

Related: Watch List: 50 Black African Women Entrepreneurs To Watch

Blu Blood has grown into one of South Africa’s leading event, artist & communication management companies, which Shaaista runs with her business partner & husband, Osman Osman.  Blu Blood is synonymous with hosting the biggest Bollywood productions in South Africa and Africa; producers of one of the most successful comedy brands, Kings & Queens of Comedy; collaborations with local and international comedians including Tumi Morake, Riaad Moosa, Orlando Jones and Russell Peter; as well as producing theatre and children’s stage productions.

But Shaaista’s biggest and most challenging project to date is the World Women’s Network.  Powered by Blu Blood, WWN is a membership based, online global initiative for women’s  economic and social empowerment with the premise of the organization being to give all women the opportunity and tools to achieve their goals, through pivotal joint ventures and strategic partnerships to build sustainable projects for the development and vision of women.   One of the key principles of WWN is the hope to uplift individuals and communicates through education and mentorship by offering free schooling, selected higher education courses and life skills courses and mentorship to members of WWN.

Director of Standard Bank TOP WOMEN, Karla Fletcher:

“We are devoted to providing the ultimate platform to address the challenges facing women-driven economic growth. Together with the CGE, our panel of judges and all those who have participated in the Standard Bank TOP WOMEN Awards in the past 15 years, we represent a community that actively responds to the pertinent questions surrounding the barriers to success for women entrepreneurs. We are excited about the work and calibre of this year’s finalists, and their significant impact offers South Africa optimism for the future.”

Shaaista proclaims that it is up to the individual to “seize every opportunity, own each day and sculpt your own brilliance”.  For more information, visit www.shaaistakhan.com.

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Entrepreneurs! Now Is The Time To Change Lives And Grow Revenues

All signs point to Africa as the most extraordinary place to be and do business in the future.

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So, how are we going to do business?

This is the question posed by Musa Kalenga, the enthusiastic entrepreneur and strategist who was named one of the Top 200 young South Africans by Mail & Guardian, at a recent Entrepreneurship To The Point Session hosted by Property Point, the Growthpoint Properties initiative.

The answer to doing business that he offers entrepreneurs, even in this digital age, is humanity.

“Humanity is the new black; it is how we are going to be the next powerhouse of this globe,” says Kalenga. “Being human is the one thing that will enable us to survive in the age of augmentation.”

Kalenga is obsessed with using technology to empower the digitally invisible. “We can send people to the moon but we can’t feed people on earth? This is a problem,” he cautions, “because unless we’re making fundamental business model changes, we won’t have a market for the future.”

He took the Entrepreneurship To The Point audience on a journey, highlighting the sweet spot where technology and creativity merge.

Looking at how African entrepreneurs should respond to the age of augmentation, he uses the shocking November 2015 Paris attacks as an example. Facebook activated its Safety Check function, Uber alerted its drivers to take people to safety, and Airbnb operators took in anyone in need.

Related: How To Make (A Lot Of) Money On Airbnb

“While these are tech businesses at their core, they displayed decidedly human responses. They also didn’t have to redo their business model to respond in a more human way,” points out Kalenga. “The technology journey that communities and consumers have to go through must match ours as brand creators, value seekers and entrepreneurs.”

Doing this is simpler than you may think. Technology’s intersection with humanity is all about finding simple, meaningful solutions.

He points to the trend of impact investment – an approach taken by some of the world’s richest family businesses. Impact investment means finding opportunities that are solving human-centred problems and creating value for the humans that we seek to serve, and then figuring out how to make revenue as a business. Essentially, it puts doing good before making money. This is where humanity, technology and entrepreneurship are on course to meet and power the extraordinary future of business in Africa.

“Human beings are at the top of the food chain because we can understand a small and simple thing, then develop it for different purposes all the time. Also, because we can rally around common cause and purpose. Enhancing quality of life in the way people experience technology is key to continuing to solve problems, not only in Africa but across the globe,” concludes Kalenga

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