TAKE A MAXIMUM TRAVEL ALLOWANCE

This piece of information is closely related to the section on not taking a 13th cheque from your employer. When structuring your remuneration package, you may be entitled to receive a portion of your earnings in the form of a travel, or car allowance. This has certain tax benefits, as long as you are able to justify your allowance to the Receiver of Revenue when you complete your tax return, taking into account the number of business kilometres travelled, make and model of your vehicle, plus other issues.

If your allowance is too high in relation to what you can justify, then you will have to pay in additional tax. If your allowance is too low, you will probably receive money back from the Receiver. While the first option is obviously one to avoid, the second option sounds very attractive. Who doesn’t like to get a cash bonus from the taxman every year? The problem is that you will wait for a number of months to get your money back, and you earn zero interest benefit while the money is in the hands of the Receiver.

Our solution is the following:

1. Establish what level of monthly allowance you can justify (you made need to consult a remuneration specialist for advice);
2. Ask your employer to apportion as much of your total package as possible towards your allowance;
3. Deposit the difference between these 2 amounts into your bond account.

This will undoubtedly mean that the Receiver will ask you to pay additional tax, as you will have underpaid during the course of the year. However, you will have the necessary money readily available in your bond account, plus you will have gained the interest benefit which will knock months off your bond term, in the same fashion as illustrated under the section entitled “Do not take a 13th cheque”.
This piece of information is closely related to the section on not taking a 13th cheque from your employer. When structuring your remuneration package, you may be entitled to receive a portion of your earnings in the form of a travel, or car allowance. This has certain tax benefits, as long as you are able to justify your allowance to the Receiver of Revenue when you complete your tax return, taking into account the number of business kilometres travelled, make and model of your vehicle, plus other issues.

If your allowance is too high in relation to what you can justify, then you will have to pay in additional tax. If your allowance is too low, you will probably receive money back from the Receiver. While the first option is obviously one to avoid, the second option sounds very attractive. Who doesn’t like to get a cash bonus from the taxman every year? The problem is that you will wait for a number of months to get your money back, and you earn zero interest benefit while the money is in the hands of the Receiver.

Our solution is the following:

1. Establish what level of monthly allowance you can justify (you made need to consult a remuneration specialist for advice);
2. Ask your employer to apportion as much of your total package as possible towards your allowance;
3. Deposit the difference between these 2 amounts into your bond account.

This will undoubtedly mean that the Receiver will ask you to pay additional tax, as you will have underpaid during the course of the year. However, you will have the necessary money readily available in your bond account, plus you will have gained the interest benefit which will knock months off your bond term, in the same fashion as illustrated under the section entitled “Do not take a 13th cheque”.