Sage VIP explains how the Budget Speech and Taxation Laws Amendment Act will affect your payroll in 2014

The new tax year is imminent and companies should take special note.

February 27, 2014

“The new tax year is imminent and companies should take special note to verify that their HR and Payroll systems incorporate the changes introduced by Finance Minister, Pravin Gordhan during his Budget Speech on Wednesday, 26 February 2014,” says Yolandi Esterhuizen, the Legislation manager at Sage VIP, a leading payroll and HR solutions provider.

“If the stipulated changes are not reflected in HR and Payroll systems as from 1 March 2014, it might result in incorrect PAYE calculations.”

A positive outcome from the budget speech is the fact that Parliament proposed an increase in the cumulative exemption for retirement and severance benefits from R315 000 to R500 000. “This will result in a higher tax free portion once these benefits are paid out,” says Esterhuizen. According to the Minister, the white paper on National Health Insurance as well as the financing paper will be tabled in Cabinet soon which might result in an improved health system. It is still unsure how the NHI will be funded, but it will possibly have an effect on payrolls.

“Government is also looking into a mandatory system of retirement for all employees due to the fact that about 6 million individuals do not enjoy employer-sponsored retirement plans” says Esterhuizen.

“There was speculation that the tax brackets would not be amended. However, it was adjusted in line with inflation,” says Esterhuizen.

There were no surprises on the front of tax tables for individuals and special trusts, tax rebate amounts and tax thresholds, with inflationary adjustments being made.

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Tax rebates

The primary tax rebate amount has been adjusted to R12 726, while a secondary rebate for persons of 65 years and older is set at R7 110. A tertiary rebate for persons of 75 years and older is R2 367.

Tax thresholds

Below the age of 65, the tax threshold has been set at R70 700, ages 65 to 74 now have a tax threshold of R110 200, while ages 75 and over have a tax threshold of R123 350.

“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 due to the duties of his or her office or employment. The value of the deemed allowance or advance where the accommodation is in South Africa has been amended to R335 per day for meals and incidental costs and R103 per day for incidental costs only. The schedule of rates for accommodation outside the country will be published on the SARS website,” says Esterhuizen. Payments that exceed these limits will be assessed by SARS.

The medical tax credits have also been increased to R257 for the main member and first dependent and R172 for every additional dependent thereafter. The medical tax credits for employees who are 65 or older are the same as for employees who are younger than 65 years of age. No deduction for employees who are 65 and older will be allowed anymore.

Travel allowance costs have also been adjusted. “The SARS prescribed rate per kilometre increased from R3.24 to R3.30. 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 2014,” says Esterhuizen.

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Esterhuizen concludes: “In going forward, employers should also take note of the impact of the Taxation Laws Amendment Act, 2013, on payroll systems. 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.