Archive for February, 2012


Do we really know the extent of government debt? South Africa’s debt to GDP ratio as listed by Eurostat is 34%. However if you include parastatal debt (the likes of Escom, Transnet, Denel etc) it is said to be more like 70%. Above 60% requires real caution so as not to fall into a debt trap. We are still in great shape when you consider Greece whose most recent round of debt restructuring was to bring its debt to GDP ratio down to 120%.

- Rob Wilkie, CFO Softline and Sage AAMEA

There is approximately R20 billion in debt following the much publicized Gauteng toll gate project. In his budget speech Pravin Ghordan announced a special appropriation of R5.8 billion against this debt, meaning that we should see the toll levy drop from 40c to 30c per kilometre. But does this really help us given his later announcement that the fuel levy would be increased by 20c. Feels like robbing Peter to pay Paul.

- Rob Wilkie, CFO Softline and Sage AAMEA

Do South African individuals have the highest effective tax rate in the world? Where else do you pay a marginal tax rate of 40% but still have to fund your security, healthcare and education

-Rob Wilkie, CFO Softline and Sage AAMEA

By Karen Schmikl, Legislation Manager at Softline VIP, part of the Sage Group plc.

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Quite a few changes were made during Finance Minister, Pravin Gordhan’s Budget Speech on Wednesday, 22 February 2012 that will have a direct impact on payroll administrators across South Africa.

Medical Aid

The most noteworthy is a change in the taxation of medical aid contributions from March 2012.  Payroll administrators will have to ensure that their payroll systems are updated as from 1 March 2012 to reflect the changes stipulated. Not implementing these changes in the first period of the new tax year will result in incorrect PAYE, SDL and UIF contributions.

Medical tax credits replace the medical aid cap amounts used over the past few years.

  • Individuals who are 65 years and older still have the benefit of a medical aid tax deductible deduction, subject to no limit.
  • Employees who are younger than 65 however, no longer have the benefit of a medical aid tax deductible deduction. They do however qualify for a monthly medical tax credit (MTC).
  • The MTC will be deducted from the tax calculated for the employee for each month the employee contributes to a medical scheme, reducing the employee’s tax due each month.
  • The MTC is calculated in relation to the number of beneficiaries on the medical aid – the values are R230 for the main member, R230 for the first dependent and R154 for each additional dependent

The result of this change is a more equitable benefit for all individuals who belong to medical aids. Lower income employees will ‘see’ a greater tax benefit than higher income employees when comparing February and March tax amounts.

Tax Tables

The tax tables for individuals and special trusts for the year ending 28 February 2013 were updated.

Taxable Income (R)  Rate of Tax (R)
0 – 160 000 18% of taxable income
160 001 – 250 000 28 800 + 25% of taxable income above 160 000
250 001 – 346 000 51 300 + 30% of taxable income above 250 000
346 001 – 484 000 80 100 + 35% of taxable income above 346 000
484 001 – 617 000 128 400 + 38% of taxable income above 484 000
617 001 and above 178 940 + 40% of taxable income above 617 000

The tax rebate amounts have also been changed.  The primary tax rebate amount has been adjusted to R11 440, while a secondary rebate for persons of 65 years and older is pegged at R6 390.  A tertiary rebate for persons of 75 years and older is set at R2 130.

The adjustment to the tax threshold amounts, effectively nullified Standard Income Tax on Employees (SITE) limits.  Below the age of 65, the tax threshold has been set at R63 556; Ages 65 to below 75 now have a tax threshold of R99 056; while Ages 75 and over have a tax threshold of R110 889.

Subsistence Allowance
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 the RSA has been amended to R303 per day for meals and incidental costs and R93 per day for incidental costs only. The schedule of rates for accommodation outside the RSA will be gazetted towards the end of the month.

Travel Allowance

Travel allowance costs have also been adjusted.  The SARS deemed rate per kilometre increased from R3.05 to R3.16.  The fuel and maintenance cost values have furthermore been amended and it is advisable to recalculate the value of all employee travel allowances from March 2012.

Value of the vehicle (incl. VAT) Fixed cost Fuel cost Maintenance cost
 (R) (R p.a.) (c/km) (c/km)
0 – 60 000 19 492 73.7 25.7
60 001 – 120 000 38 726 77.6 29.0
120 001 – 180 000 52 594 81.5 32.3
180 001 – 240 000 66 440 89.6 36.9
240 001 – 300 000 79 185 102.7 45.2
300 001 – 360 000 91 873 117.1 53.7
360 001 – 420 000 105 809 119.3 65.2
420 001 – 480 000 119 683 133.6 68.3
exceeding 480 000 119 683 133.6 68.3

The changes lined out in Finance Minister, Praveen Gordhan’s Budget Speech will have far reaching effects on any payroll system.  It is advisable for employers to take note of these changes and to confirm that they are being applied to their payroll system in order to keep the company current and up to date with legislation.

“The budget speech provided for a few uninspiring tax incentives for small business. But are tax incentives what small business really needs? I would argue that quality infrastructure, less red tape and admin burden and access to finance are far more important. Small business would also like to see local government award contracts fairly; and those lucky enough to win a contract still face the challenge of getting paid on time. As the growth engine for our economy, we need small business. I guess the fundamental question then is how do you start a business without some sort of decent education?”

- Rob Wilkie, CFO Softline and Sage AAMEA 

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Two tax proposals relevant to micro and small business caught my attention during Pravin Ghordan’s budget speech.

  1. a.       Turnover tax for micro businesses

Several reforms of the turnover tax for micro businesses (with annual turnover below R1 million) were announced in 2011. Building on these reforms, small business will now be given the option of making payment of turnover tax, VAT and employees’ tax at twice-yearly intervals from 1 March 2012.

It is further envisaged that a single combined return will be filed on a twice-yearly basis from 1 March 2013. The number of returns and payments therefore required for these taxes will fall from about 18 per year to only two a year in 2013.

A word of warning though – the build-up of tax liability will require such taxpayers to ensure that funds are available when payment is due.

  1. b.      Small business corporations

To encourage the growth of small business corporations (with annual turnover under R14 million), government proposes to increase the tax-free threshold for such businesses as follows.

Taxable Income              Rate of tax
R0 – R63,556 0%
R63,557 – R350,000 7% of amount above R63,556 but less than R350,000
R350,001 and above R20,051 + 28% of amount above R350,000

This table will be effective for years of assessment ending on or after 1 April 2012.

-By Rob Wilkie, CFO Softline and Sage AAMEA

Education matters and governments commitment to spending more over the medium term is certainly welcome.

When considering the skills an entrepreneur requires to succeed in building a business we tend to focus on vision and creativity, selling technique, planning and people management. What we often overlook are the basic skills of writing and speaking.

Writing is an important part of thinking, communicating and selling; speaking opens the interests of other and welcomes your proposition; and the best way to enhance these skills is by reading.  These are the most dominant skills we learn in school and are the foundation to our education.

Pravin Gordhan said in his budget speech that to put our economy on a more rapid growth path, we needed to effectively direct and manage improvements in education and skills development.

Education is not a luxury but a responsibility that we as parents owe to our children.  It is said that upon the education of our children, the fate of our country depends.

-By Rob Wilkie, CFO Softline and Sage AAMEA

Infrastructure expansion investment was a central priority in Pravin Gordhan’s budget speech.

It is a fact that poor infrastructure impedes economic growth and international competitiveness, and I applaud government’s intention to improve the supply and quality of infrastructure services.

The budget review lists 43 major projects adding up to R3.2 trillion between 2012 and 2010. A summary is presented in the table below.

The real challenge however is in execution. Drawing a house is easier than actually building it. In his budget speech Pravin Gordhan acknowledged long delays and significant cost over-runs and committed to stepping up management so that projects are delivered on time and on budget.

Small business plays a critical role in its contribution to GDP and employment. It’s time government plays its role.

-By Rob Wilkie, CFO Softline and Sage AAMEA

Finance Minister Pravin Gordhan delivered a safe, no real surprises budget [yesterday] ([Wednesday] 22 February) with R9.5-billion personal tax relief achieved by increasing the personal tax brackets. This brings the primary annual tax rebate for individuals under the age of 65 to R11 440, for individuals aged between 65 and 75 to R6 390 and those aged 75 and older to R2 130.

A key feature of the budget is that tax revenue stabilised at about 25% of South Africa’s gross domestic product (GDP). Overall revenue was slightly lower than the estimate in February last year and the revised estimate for 2012/13 is R739-billion, which is R10-billion higher than projected last year. Also pleasing was reductions in the rates of tax on small businesses and in the compliance burden on micro businesses.

It is proposed that from March 2014 an employer’s retirement fund contributions on behalf of an employee will be regarded as a taxable fringe benefit in the hands of the employee. Individuals will be allowed to deduct up to 22.5% of the higher taxable income or employment income for contributions to pension, provident and retirement annuity funds to a maximum of R20 000 and an annual maximum of R250 000. For individuals of 45 and over the deductible amount is up to 27.5% with a minimum annual deduction of R20 000 and annual maximum of R300 000.

There is a major change relating to medical aid where from 1 March 2012 the capping system will be replaced with a medical aid tax credit, bringing in equality for all taxpayers under the age of 65 and improved benefits for lower earners, a move in line with international best practice. The medical aid tax credit is R230 a month for the first two beneficiaries (including the principal member) and R154 for each additional dependent thereafter. Taxpayers over the age of 65 will receive their full medical aid contribution as a tax deduction in 2014.

Comments Grant Lloyd, managing director of payroll and HR software specialist Softline Pastel Payroll, part of the Softline and Sage Group plc: “The medical aid tax credit system will likely result in lower earners receiving greater benefits, which is a good thing.”

He adds that the Site tax portion of PAYE will fall away, making payroll administration easier.

“Secondary Tax on Companies (STC) will be terminated on March 31 this year and a withholding tax of 15% on dividends is to be introduced on April 1. The tax will be withheld on payment, not on declaration. South African branches of foreign resident companies are exempt from STC.”

Capital gains tax rates have effectively been increased to 13.3% for individuals, 18.6% for companies and 26.7% for Trusts, effective March 1.

Most individual taxpayers will be affected by the introduction of a 20-cent levy on fuel and an 8-cent levy for the Road Accident Fund.

To assist SME businesses with the changes outlined in the new Budget, Softline Pastel Payroll is incorporating all of the Budget changes to tax bracket values, medical aid benefits, and tax relief rebates.

“Automated Payroll and HR software ensures that payrolls are accurate and legally compliant the moment the new Budget stipulations take effect in the new tax year,” says Lloyd.

To find out how the Budget Speech affects your pocket, visit www.pastelpayroll.co.za and enter your current monthly salary and allowances in the online Pastel Salary Tax Calculator.

ISSUED BY: COPYWISE

ON BEHALF OF: SOFTLINE PASTEL PAYROLL

Softline Accpac celebrated their 20th Annual Partnership Conference held at the magnificent Champagne Sports Resort. The conference was the first Sage Insights Conference, in line with the move to align with the Sage brand worldwide.

As the Sage Insights 2012 Conference drew to a close, an eclectic group of attendees from Africa and around the globe hailed the event as a resounding success.  Delegates spent a productive few days learning about new developments in the Enterprise Resource Planning (ERP) and Customer Relationship Management (CRM) space in addition to networking with fellow practitioners in the field.

Some of the highlights of the Sage Insights 2012 Conference, besides the breathtaking views of the Drakensberg mountains, included the launch of the standard edition of Sage ERP X3, the Sage ERP Accpac V6.1 roadmap, Sage CRM v7.1 as well as new versions of SalesLogix and Sage 1000.

“It has been an extraordinary year for Sage Accpac and ERP solution providers as well as third party developers,” says Jeremy Waterman, Managing Director, Softline Accpac and Sage MMD Africa.  “We had a great deal to discuss and debate at Sage Insights 2012 with the African region showing double digit growth over the past year,” says Waterman.

“We are determined to maintain and grow the African market which is linked to the performance of our business partners and resellers.  “The awards dinner that was held on Saturday, 11 February 2012, is testament to the fantastic work that is being done to expand Softline Accpac’s footprint in the African market,” says Waterman.

2011 award winners were as follows:

  • Sage International Development Partner of the Year:  Norming Software
  • Sage Local Development Partner of the Year:  PereSoft Software and Support
  • Technical Excellence on Sage ERP X3:  Times 3 Technologies
  • Best Achiever Sage ERP Accpac – South Africa:  MyMethod Consulting
  • Best Achiever Sage ERP Accpac – Africa:  NetOne Consulting
  • Best Achiever Sage ERP X3:  Afresh Consult
  • Best Achiever Sage ERP X3:  Deloitte Consulting
  • Highest Sales – Third Party Products in South Africa:  Norming Software
  • Highest Sage RMS and Sage ERP X3 Sales:  Times 3 Technologies
  • Highest Sage Line 500 and Related Sales:  Antinomy Business Consulting
  • Sage Best Performance – Gauteng:  Times 3 Technologies
  • Sage Best Performance – Southern Africa:  AM Consultancy Services
  • Sage Best Performance – East Africa:  Binary Systems
  • Sage Best Performance – West Africa:  Lagetronix Nigeria
  • Sage Best Performance – Cape:  Astraia Technologies
  • Sage Best Performance – KwaZulu Natal:  Antwan cc
  • Sage CRM – Best Performer:  Synergy Group
  • Sage National Solution Provider of the Year:  AccTech Systems

“We are looking forward to 2012 and the challenges it might bring.  We are also looking forward to the next rendition of Sage Insights 2013 where we will reflect on the year in the making.  May it be a good one,” concludes Waterman.