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Will company contributions to a disability benefit be taxed as fringe benefits?

09 April 2015   (0 Comments)
Posted by: Author: SAIT Technical
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Author: SAIT Technical

Q: Could you kindly assist with the following query as we seem to be receiving conflicting information from various sources.

Prior to March 2015 the Disability Benefit/Income Continuity Benefit was tax deductible and subject to Fringe Benefit tax. Changes to taxation for the 2016 Tax Year have seen the tax deductible element fall away whilst the fringe benefit tax has remained.

My question is as follows:

Will any company contribution to a Disability Benefit or Income Continuity Benefit be subject to Fringe Benefit tax or is it only those funds that are unapproved?

A: Where insured benefits are provided by an approved fund (i.e. pension or provident fund), then in our view the contributions to the fund from which the benefits are provided do not fall within the ambit of the Seventh Schedule to the ITA. They merely form part of the fund contributions by the employer (i.e. it is not a separate obligation but part of the contribution per the fund rules) and remain benefits payable by a fund from such contribution. The changes in our view only affect unapproved fund benefits.

Disclaimer: Nothing in this query and answer should be construed as constituting tax advice or a tax opinion. An expert should be consulted for advice based on the facts and circumstances of each transaction/case. Even though great care has been taken to ensure the accuracy of the answer, SAIT do not accept any responsibility for consequences of decisions taken based on this query and answer. It remains your own responsibility to consult the relevant primary resources when taking a decision.


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