Issued on behalf of Sage VIP Payroll

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:

Taxable Income (R)

Rate of Tax (R)

0 – 165 600 18% of taxable income
165 601 – 258 750 29 808 + 25% of taxable income above 165 600
258 751 – 358 110 53 096 + 30% of taxable income above 258 750
358 111 – 500 940 82 904 + 35% of taxable income above 358 110
500 941 – 638 600 132 894 + 38% of taxable income above 500 940
638 601 and above 185 205 + 40% of taxable income above 638 600

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.

Value of the vehicle (incl. VAT)

Fixed cost

Fuel cost

Maintenance cost

 (R) (R p.a.) (c/km) (c/km)
0 – 60 000 19 310 81.4 26.2
60 001 – 120 000 38 333 86.1 29.5
120 001 – 180 000 52 033 90.8 32.8
180 001 – 240 000 65 667 98.7 39.4
240 001 – 300 000 78 192 113.6 46.3
300 001 – 360 000 90 668 130.3 54.4
360 001 – 420 000 104 374 134.7 67.7
420 001 – 480 000 118 078 147.7 70.5
exceeding 480 000 118 078 147.7 70.5

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

Sidebar 1

Rental Cars as Company Cars

Under normal circumstances, vehicles provided as company cars to employees are owned (purchased or leased) by the employer. Currently, if the company rents a vehicle on a medium term basis and grants the use of it to an employee, the market value is used as the determined car value. Going forward, SARS wants to provide for scenarios where the vehicle is rented by the employer and is subject to an operating lease.

As from 1 March 2013 the actual cost incurred under that operating lease, plus fuel cost is used as the fringe benefit value, as long as the rental arrangement can be viewed as an operating lease. There are specific conditions to comply with, for it to be seen as an operating lease:

  • The employer must rent the vehicle from a company that is in the business of renting cars
  • The vehicle may be rented by the public for a period of less than a month
  • The cost of maintaining the vehicle must be done by the rental company
  • Risk of the loss or damage must not be assumed by the employer

The taxation of company cars, which are not subject to an “operating lease”, stays unchanged.

Sidebar 2

Variable Remuneration

Remuneration should be taxed when it is paid to the employee or when it is accrued (whichever happens first). This principle sometimes causes problems as a payment can be accrued in a tax year but only be quantified and paid in the next tax year. From 1 March 2013, variable remuneration should be taxed in the month that it is paid to the employee and not when it accrues. This is quite a significant change as this will relief the administrative burden of managing these payments.

Variable remuneration is defined as:

  • Overtime
  • Bonuses
  • Commission
  • An allowance or advance paid in respect of transport expenses such as a travel allowance
  • Leave Paid out