Finance Minister, Pravin Gordhan’s Budget Speech on Wednesday, 27 February 2013, introduced several changes that will have a direct impact on payroll and HR across South Africa. Leading payroll and HR solutions provider, Sage VIP, says that administrators will have to ensure that their payroll systems are updated as from 1 March 2013 to reflect the stipulated changes. “Not implementing these changes, in the first period of the new tax year, will result in incorrect PAYE calculations,” says Karen Schmikl, Legislation Manager at Sage VIP, part of the Sage Group plc.
The tax tables for individuals and special trusts for the year ending 28 February 2014 are:
Schmikl says the tax rebate amounts have also had changes in line with inflation: “The primary tax rebate amount has been adjusted to R12 080, while a secondary rebate for persons of 65 years and older is set at R6 750. A tertiary rebate for persons of 75 years and older is R2 250.”
The tax thresholds have also been adjusted. Below the age of 65, the tax threshold has been set at R67 111; ages 65 to 74 now have a tax threshold of R104 611; while ages 75 and over have a tax threshold of R117 111.
“An employee is entitled to receive a subsistence allowance when the employee is obliged to spend at least one night away from his or her usual place of residence. The value of the deemed allowance or advance where the accommodation is in South Africa has been amended to R319 per day for meals and incidental costs and R98 per day for incidental costs only. The schedule of rates for accommodation outside the country has been published on the SARS website,” says Schmikl.
The medical tax credits have also been increased to R242 for the main member and first dependent and R162 for every additional dependent thereafter.
Travel allowance costs have also been adjusted. “The SARS deemed rate per kilometre increased from R3.16 to R3.24. The fixed cost, fuel and maintenance cost values have been amended and it is advisable to recalculate the value of all employees’ travel allowances from 1 March 2013,” says Schmikl.
The Residential Accommodation Fringe Benefit abatement value has increased from R63 556 to R67 111. Schmikl says many companies provide their employees with housing assistance or home loans. This imposes a fringe benefit calculation, which is burdensome if the company transfers the house to the low-income employee. However, Treasury intends to review the fringe benefit tax calculation to lower the burden, which is positive news.
“There were speculations that an additional tax bracket would have been added for higher income earners. However, with the small number of individuals in the top income bracket, this would not have made a significant contribution to the revenue required,” says Schmikl.
A positive outcome from the budget speech is the fact that Parliament will be considering tax incentives for employers, as part of a scheme to share the costs of employing young work seekers. However, it is still unclear how and when this will be implemented.
According to Schmikl, the Retirement Reform might be implemented in March 2014. “This will result in fringe benefit calculations when an employer contributes towards the employees’ retirement funds which include pension and retirement annuity funds. A 27.5% deduction is proposed on contributions with a maximum annual deduction of R350 000,” says Schmikl.
She continues: “In going forward, employers should also take note of the impact of the Taxation Laws Amendment Act, 2012, on payroll systems. This includes a change in the way employers deal with rental cars as company cars and the taxation of variable remuneration. It is advisable for employers to ensure that these changes are being applied to their payroll system, to keep the company compliant and up to date with legislation.
For more information on the Budget Speech or to reserve a seat for the Annual Payroll Tax Seminar, please visit www.vippayroll.co.za.