Fringe Benefits and Tax: What SARS Wants and How to Stay Out of Trouble
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A gym membership here, a discounted staff loan there, fringe benefits feel like the cherry on top of your paycheck. But for employers and employees alike, those extras can quietly trigger SARS red flags if they’re not handled by the book.
In 2025, the tax treatment of fringe benefits is more complex (and more scrutinised) than ever. Misvalue a company laptop or forget to declare the car allowance correctly? That could mean underpayment penalties, IRP5 errors, and awkward questions during audit time.
Let’s break down what counts as a fringe benefit, what SARS expects from you, and how to stay compliant while still offering attractive perks.
What is a fringe benefit?
In plain terms, if your employer gives you a non-cash benefit that has value and you’re getting it because you work there, it is likely a fringe benefit. The Seventh Schedule of the Income Tax Act, 1962 (ITA) governs these benefits and outlines when they are taxable and how to value them.
Examples Fringe Benefits
The following are all considered “fringe benefits”:
Use of a company car for personal errands
Getting a loan at 0% interest
Employer-paid medical aid or insurance on your behalf
Subsidised meals or housing
Getting a laptop or phone that you also use at home.
These benefits are added to the employee's taxable income, and pay-as-you-earn (PAYE) must be withheld accordingly.
How is the benefit calculated?
SARS has strict valuation rules, outlined in the Seventh Schedule and detailed in its 2025 Fringe Benefits Guide.
Example 1: Company Car
Reference: Paragraph 7 of the Seventh Schedule
Value: 3.5% of the vehicle's determined value per month (3.25% if a maintenance plan is included)
Reduction: Possible based on actual business vs. private use logged
IRP5 Code: 3802.
Example 2: Low-Interest Loans
Reference: Paragraphs 2(f), 10A, and 11 of the Seventh Schedule
Value: Difference between the official SARS interest rate and the actual interest charged
Exemptions: Loans < R3,000, study loans, or housing loans < R450,000 (if salary < R250,000)
IRP5 Code: 3801
Example 3: Medical Scheme Contributions
Reference: Paragraphs 2(i) and 12A of the Seventh Schedule
Value: Total contribution made by the employer
No-value rule: Applies if the contribution is made for a retired employee or the dependents of a deceased employee
IRP5 Code: 3810
Example 4: Right of Use of Asset (e.g., holiday accommodation)
Reference: Paragraphs 2(b) and 6 of the Seventh Schedule of the Income Tax Act
Value: 15% per annum of the lower of the cost or market value, apportioned by use period
IRP5 Code: 3801.
What SARS Expects from Employers
Employers are legally required to:
Identify and calculate fringe benefits monthly
Deduct the correct amount of PAYE (or spread over the tax year if excessive)
Reflect the benefit and value using the correct IRP5/IT3(a) codes
Submit this in their EMP501 reconciliation.
Failure to comply can result in penalties up to 10% of the benefit's value (per Section 95 of the Tax Administration Act).
Tips to Stay Compliant
Keep clear records: logbooks, loan agreements, benefit policies
Use SARS's Fringe Benefit Guide and update payroll systems
Review exemptions annually, many nil-value rules depend on proper structuring
Final Thought
Fringe benefits can be win-win, great for morale and retention, and tax-smart when done right. But they can also trigger audits and penalties if you're not careful. Whether you're drafting policies or reviewing your IRP5, make sure every perk is paired with its tax treatment.
For more, see SARS's Fringe Benefit Guide 2025.
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