Budget relief for individual taxpayers

In his maiden budget speech Minister of Finance Pravin Gordhan enhanced his popularity on Wednesday 17 February by announcing a practical Budget which provides tax relief for individuals totalling R6.5-billion and does away with SITE tax with effect from 1 March 2011.

As expected, most of the relief goes to lower income brackets and the primary rebate for all individual taxpayers increases to R10 260 a year while the secondary rebate for people over the age of 65 increases to R5 675 a year.

“It is largely a no shocks Budget which comes as relief to many taxpayers who were anticipating the worst knowing that SARS has a deficit of R68.9-billion to recover but it appears the intention is to do this over a period of time by tightening up on compliance,” said Grant Lloyd, managing director of Payroll and HR software specialist Softline Pastel Payroll.

“Employers paying PAYE will have to be aware that SARS is enforcing electronic submission of the monthly EMP201 PAYE returns using either the Internet-based eFiling or the desktop e@syFile system. This is being enforced from 1 March 2010, meaning that employers will not be able to manually submit their EMP201 Return for March on 7 April 2010, the due date.”

The tax deductible values for medical aid have also been increased, providing monthly relief for taxpayers. Every month employees can claim a fixed tax deduction of R670 for each of the first two members of a medical aid scheme and R410 for each additional member.

Lloyd added that employers have been given notice that SARS is very serious about converting to a fully electronic system and should therefore take appropriate measures to ensure that they are equipped to comply.

Employers also need to be aware of the change in travel allowances effective from 1 March 2010. SARS has taken a stricter approach for the 2010/11 tax year. Until now 60% of the value of the travel allowance was regarded as part of overall remuneration and therefore subject to Pay As You Earn (PAYE). The new Budget sees this increased to 80%. Claims for travel allowance also have to be accompanied by a detailed logbook as the “deemed kilometres” system is no longer in place. In essence it means that employers will have to limit travel allowances to those employees that really qualify for them.

To assist SME businesses with the changes outlined in the new Budget, Softline Pastel Payroll will incorporate all of the changes to tax bracket values, travel allowances, tax relief rebates and medical aid.

A date embedded trigger in the software tax table update ensures that all of the changes will only be applied from 1 March, even if the update download is conducted before the end of February. Automated Payroll and HR software ensures that payrolls are accurate and legally compliant the moment the new Budget takes effect.