Depreciation of Company Vehicle

From March 2015

  • The value to be used as the determined car value is the retail market value as determined by the Minister in a regulation. This paragraph is only applicable to vehicles acquired or manufactured from March 2015.
  • Maintenance plan is now defined as a contractual obligation undertaken by a provider to underwrite the costs of all maintenance of that motor vehicle, other that costs related to top-up fluids, tyres and abuse of the vehicle. The obligation is for at least 3 years and 60000 kilometres from the date the provider undertakes the contractual obligation, and may terminate when either condition is met.

Depreciation Calculation and Calculating the New Determined Car Value

Determined car value = Determined car value – depreciation value.

Depreciation value = Determined car value * 15%

 

Example 1:

Company acquires a car on the 01/03/2016 for R150,000.00.

The employee A, gets the use of the car on 01/04/2017.

Full 12 month period has passed since the employer has acquired the assets and the employee has use of the company car.

Therefore, depreciation must be taken into account.

 

Determined car value = determined value – depreciation

= 150000 – (150000 * 15%)

= 150000 – 22500

= R 127500

 

Example 2:

If employee A in the above example uses the car for one year and now employee B acquires the use of the car on 01/04/2018.

Since this is the first time employee B has acquired the use of this company car and two full years have passed since the company acquired the vehicle, two full years depreciation must be taken into account.

 

Determined car value = determined value – depreciation

Year 1

= 150000 – (150000 * 15%)

= 150000 – 22500

= R127500

Year 2

= 127500 – (127500 * 15%)

= 127500 – 19125

= R 108375

 

Example 3:

If employee B uses the car for a year, and the company car is given back to employee A to use from 01/04/2019. No further depreciation will take place for employee A, and the original determined car value calculated for employee A will still be used as the determined car value.

 

Employee A determined car value = R 127500.00

  • Hi Heleen 

    Thank you 

    This makes perfect sense.

    Just to confirm, depreciation is only accounted for when the vehicle 'changes hands'?

    My case is as follows:

    01 Jan 2016, employee A has the use of the vehicle. The determined value is R 150,000.00.

    Employee A uses the vehicle for 2016 and 2017.

    01 Jan 2018, employee B starts to use the vehicle so i need to account for 2 years of depreciation in order to calculate the 'new determined value' so that employee B can be taxed correctly.

    Depreciation is therefore as follows:

    Depreciation for year 2016: R 150,000.00 x 15% = R 22,500.

    Depreciation for year 2017: (R 150,000.00 - 22,500.00) x 15% = R 19,125.00

    Therefore determined value at the start of 2018 when employee B gets the vehicle is R 150,000.00 - R 22,500.00 - R 19,125.00 = R 108,375.00

    Employee B uses the vehicle for 2018 and 2019.

    Do i need to do a depreciation calculation at 01 Jan 2019 while employee B is still using the vehicle? 

    My understanding is that there should be no depreciation for 2018 year to be accounted for as the employee B is still using the vehicle.

    Kind regards

    Buschra Parker

  • Hi Buschra
    The depreciation will only be applied to employee B at 01 Jan 2018
    Two year depreciation will be used, as the employee A had the vehicle for two completed years
    You will only depreciate the two years once at 01 Jan when Employee B receives the vehicle

  • Thank you!

    now i can confirm this to the employee because the employee asked me for the 'new depreciated value after using the vehicle for one year'.

    Kind regards

    Buschra Parker