Archive for February, 2014

Madelein van der Watt, development manager at Sage Pastel Payroll & HR.

Madelein van der Watt, development manager at Sage Pastel Payroll & HR.

Finance Minister Pravin Gordhan delivered no surprises in his Budget Speech on 26 February, favouring consistency and steadiness over change and fireworks ahead of the national election on 7 May. His Budget Speech once again put job creation, infrastructure development, social spending and education right on top of the nation’s list of priorities.

Taxpayers will benefit from R9,25 billion in personal income tax relief in the new tax year, though this relief hardly caters for the effects of inflation, says Madelein van der Watt, Development Manager at Sage Pastel Payroll & HR.  40% of the tax relief was allocated to those who earn up to R250,000 per annum, meaning individuals earning more than R250,000 per annum will receive a little less of the allocated tax relief pool.

Personal income tax brackets and rebates

Personal income tax brackets and rebates have been slightly adjusted. The amount an individual can earn before being required to pay income tax has been increased for the 2014/15 tax year:

  • Increase from R67,111 to R70, 700 for individuals below the age of 65
  • Increase from R104,611 to R110, 200 for individuals between the ages of 65 to  below 75
  • Increase from R117,111 to R123, 350 for individuals over 75 years

Individuals aged 65 and older will pay less tax due to an increase in the secondary rebate. The tertiary rebate for individuals aged 75 or older has also been increased which means less tax payable by the elderly from 01 March 2014.

The annual tax rebates for individuals have been increased as follows:

  • Under the age of 65 increased from R12,080 to R12, 726
  • Aged 65 to 75 increased from R6,750 to R7, 110
  • Aged 75 and older increased from  R2,250 to R2, 367

Though some commentators had speculated that high earners would need to pay higher income tax, the Minister left income tax rates untouched, says Van der Watt. The lowest tax bracket remains at a tax rate of 18% (annual taxable income up to R174, 550) and the highest tax bracket remains taxable at 40% (annual taxable income of more than R673, 100).

Tax credits for medical scheme contributions

Effective from 1 March 2012, the medical aid capping system was replaced with a tax credit – bringing in equality for all taxpayers under the age of 65 and improved benefits for lower earners. Monthly tax credits for medical scheme contributions (reduction of tax payable) have been marginally increased from:

  • R242 to R257 for the main member and the first dependent on a medical scheme
  • R162 to R172 for each additional beneficiary on the medical scheme

The medical aid tax credit system allows a reduction on income tax and does not reduce taxable earnings as the medical aid deduction system allowed in the past. The credit system is a more fair approach to providing tax relief as each individual contributing towards a medical aid fund will receive equal relief as it is not based on annual earnings. Whether an individual earns R250,000 per annum or R2,500,000 per annum, the income tax liability will be reduced by R257 for each of these individuals with at least a single beneficiary on the medical aid fund.

From the 2014/2015 tax year, medical aid contributions by people older than 65 will also be subject to the medical aid tax credit system. Up until now, those contributions were fully tax deductible.

Fuel levies & subsistence allowances

The general fuel levy and the Road Accident Fund levy will increase by 12c per litre and 8c per litre respectively by 2 April 2014. This will push up the general fuel levy on petrol to R2.25 per litre and R2.10 per litre of diesel. Subsistence allowances paid to employees who travel for business within South Africa, will be tax-free provided the amount paid for meals and incidental costs does not exceed R335 per day. An amount not exceeding R103 per day for incidental costs will also be exempt.

Any good news for SMEs?

Van der Watt says that SMEs could benefit from a recommendation made by the Davis Tax Committee to introduce a tax compliance rebate that replaces the current progressive tax rate structure for income tax on companies. “Minister Gordhan’s speech indicated that he is looking at ways to reduce red tape for small businesses by amending the turnover tax regime and replacing the graduated tax structure for small businesses with refundable tax compliance credits,” she adds.

Youth subsidy and spending

Government will be collecting around R1.02 trillion in tax revenues for the 2014/15 tax year, but how will that money be spent? Mindful of the country’s budget deficit, Minister Gordhan plans to increase real non-interest spending by only 1.9% over the next three years.

Sage Pastel Payroll & HR correctly predicted that the lion’s share of revenue allocation during this year’s budget announcement would go to health services, education and social grants. Minister Gordhan allocated R254 billion for education, R146 billion for healthcare, R143 billion allocated to build new homes and improve basic infrastructure in communities.  Social grant expenditure has risen to R118 billion this year.

The Minister also provided feedback about the Employment Tax Incentive in his speech. The Minister mentioned that already in the first month of implementing the subsidy – aimed at increasing employment for the youth – about 56,000 beneficiaries were recorded.

What’s next?

Though Minister Gordhan’s Budget Speech was conservative, South Africans might see more radical changes to the tax system when he or his successor delivers the Medium Term Budget Policy Statement in October. The Tax Review Committee led by Judge Denis Davis has started wide-ranging investigations into South Africa’s tax system, including a focus on value-added tax, mining taxes and wealth taxes.

In addition, Government will soon publish its National Health Insurance white paper, which may also impact on South African businesses and taxpayers.

Sage Pastel Payroll & HR assists SMEs

To assist SME businesses with the changes outlined in the new Budget, Sage Pastel Payroll & HR is incorporating all of the Budget changes to tax bracket values, medical aid benefits, and tax relief rebates. This will ensure that Sage Pastel Payroll & HR customers are immediately compliant when the new Budget stipulations take effect in the new tax year.  “With our automatic software updates, our customers will have the new year’s tax rates and calculations downloaded as soon as they open their software to process the first payslip run for March 2014,” says Van der Watt.

“We understand small and mid-sized businesses’ day-to-day challenges. Our software is designed to make your life so much easier so you have more time to do what you do best – grow your business,” says Sumay Dippenaar, Marketing Manager at Sage Pastel Payroll & HR.

“There is no reason for businesses to rely on manual payroll spreadsheets since we offer automated solutions that are easy-to-use, smart and affordable, whether you deploy them on the desktop or in the cloud. Our subscription-based payroll solution allows you to pay low monthly fees with no upfront capital outlay, keeping your cash flow in mind.” With an online payroll solution, you only pay per payslip that you process. This pay-as-you-go model is cost-effective at R18 excluding VAT per payslip.

For more information

For more help understanding what the Budget Speech will mean for you and your business – and a chance to win R10,000 – check out Sage Pastel Payroll & HR’s extensive set of online resources for Budget 2014/15:

>Competition: Stand a chance to win R10, 000

>Attend a Budget Speech Seminar, everything explained in laymen’s terms

>Free Salary Tax Calculator

>FREE Online Logbook

>FREE Tax Guide

>New Tax Rates

>Everything else you need to know

>Automate your payroll using an online solution 

For the latest legislative news, connect with Sage Pastel Payroll & HR on Twitter (Payroll News), Facebook or LinkedIn. To read more about the upcoming budget speech, click here.

Sage Pastel Payroll & HR is creating South Africa’s first-ever live infographic and you can win R10,000 by helping to build it. The infographic displays in real time what South Africans like you are expecting to see from Finance Minister Pravin Gordhan’s Budget Speech on 26 February.

To participate, simply answer 10 easy questions on the website and then watch as our infographic grows and changes as more South Africans take part. Everyone who answers the questions will be entered into the competition. You are able to earn additional entries into the competition by sharing the competition via Twitter, Facebook, LinkedIn or you can share via email to a friend or the person paying your salary.

On budget day, you will be able to follow us for all the Budget Speech updates as it happens, real-time. We’ll give you blow-by-blow Budget Speech updates, including the most popular conversations around the Budget Speech, most popular words and key phrases that are searched for on Google on the day and you can view all the live tweets relating to the Budget Speech announcement on 26 February.

But that’s not the only way Sage Pastel Payroll & HR will help you to make sense of this year’s Budget Speech. As Minister Gordhan is wrapping up his speech, the company’s tax wizards will be working to create a range of content that will help you understand what the Budget means for you as a tax payer and as a business owner.

The Sage Pastel Payroll & HR website will feature the sudget speech transcripts, supporting documents and a handy Tax Guide for the 2014/2015 tax year. There will also be a free updated salary tax calculator where you can enter your salary, relevant allowances and contributions to see whether you’ll pay more or less tax in the new tax year. You are able to download a free online travel logbook that is SARS compliant and that allows you to keep track of your travel claims throughout the year and view a summary at the end of the tax year. All you need to do is simply enter your kilometers travelled, destination details and rate of reimbursement, easy!

If you are responsible for running your company’s payroll, you could also benefit from Sage Pastel Payroll & HR’s tax seminars. Lastly, you can make use of the free 30-day trial period to test-drive our smart online payroll solution – this solution is easy and will ensure all the Budget Speech changes are taken care of for you, allowing you to work smartly and efficiently.

Says Sumay Dippenaar, Marketing Manager at Sage Pastel Payroll & HR: “Against the backdrop of a looming national election and a difficult global economy, this is certainly going to be an interesting Budget Speech to watch. Whatever emerges from Minister Gordhan’s speech, our tools and content will help you to understand what this year’s budget will mean for you as an employee or as the owner of a business.”

Madelein van der Watt, Development Manager at Sage Pastel Payroll & HR predicts that Minister Gordhan will not surprise the country with any new taxes and that he will continue to allocate most of the personal income tax relief to lower income earners and the elderly. Sin taxes on alcohol and tobacco products as well as fuel levies are likely to go up, as has become tradition. The lion’s share of revenue allocation during this year’s budget announcement should likely go to health services, education and social grants.

FFor the latest legislative news, connect with Sage Pastel Payroll & HR on Twitter (Payroll News), Facebook or LinkedIn.To read more about the upcoming Budget Speech, click here.

The Sage Insights 2014 conference provided inspiration to everybody part of the Sage ERP ecosystem. The annual conference was held at Champagne Sports Resort in the Drakensberg and attended by more than 250 Sage ERP Africa business partners, which included many partners from Southern, East and West Africa as well as the Middle East.

In his opening address, Jeremy Waterman, Managing Director of Sage ERP Africa and the Middle East said: “The key to being a successful business player in the ERP sector is realising the existence of major disruptive trends and ensuring solutions adapt accordingly. Whether you are business owner, software developer, or a sales person, disruptive technologies, such as cloud, mobile and connected services are a reality and applying its principles will make you one step ahead of the competition. You need to find a way to be disruptive or you will be disrupted.”

Waterman noted that 2013 had been a very busy year during which Sage had rebranded from Softline and established itself as the brand leader in the supply of effective business solutions to small and medium size businesses throughout the African continent. Their presence in East Africa is on the increase and they have established a significant foothold in West Africa with the opening of a Sage office in Lagos, Nigeria. Further to this, Sage ERP Africa has also assumed the management of the Middle East region during 2013.

Himanshu Palsule, Chief Technology Officer at Sage North America, focused his keynote address on the impact of mobility and cloud as disruptive forces in the market today, and how the Sage 300 ERP business was leveraging these as an opportunity in developing the product roadmap. “Our markets are transforming, the web and mobility have disrupted the value chain and we need to react responsibly to the disruption by investing in purposeful innovation. We need to give customers flexibility and choice and therefore our roadmap for the future will include a total reimagining of the product, focusing not only on mobility and cloud but also modernising the user interface for an improved customer experience. Sage ERP 300 has been chosen as one of the select small to medium business (SMB) products worldwide that Sage is investing in to effectively position it as a competitive force in the cloud.”

In the keynote delivered by Amanda Jobbins, Chief Marketing Officer for Sage, highlights of Sage’s Global Brand strategy, were shared. “At Sage we are on a new and exciting journey with the development of our brand in the minds of customers. We want to ensure consistency in our visual identity and ensure that customers recognise us a global leader and a partner that will give them the freedom and confidence to succeed.”

Keynotes were also delivered by Christophe Vanackere, Director of international operations at Sage ERP X3, on the seven exciting new strategies for Sage ERP X3 V7 to be released June 2014 and Tom Nolan, Head of Sage CRM, focused on the road ahead for Sage CRM and the integration with Sage 300 ERP as well as Sage ERP X3.

A strategic sales summary was delivered by Keith Fenner, Senior Vice President for Sales at Sage ERP Africa and Middle East. “Our excellent growth figures show that as a company we are disruptive and contribute in building the economy in Africa by being innovation partners for businesses. In going forward and ensuring that we keep a customer for life, it will be important to accelerate disruption by ensuring the development of relevant and modern solutions.”

Waterman concludes: “Sage Insights 2014 was the most exciting conference in many years because it focussed on what was actually being delivered now. The conference in 2013 defined the way forward for our three core products – Sage 300 ERP, Sage ERP X3 and Sage CRM in terms of meeting the challenges of cloud and mobility. This year it was all about the actual execution of these strategies. There are particularly exciting times lying ahead for us, our business partners and Industry Solution Vendors (ISV’s) as we work together to deliver disruptive solutions to the customer. The conference was an excellent opportunity for us to network, share information and very importantly, have some fun.”

Madelein van der Watt, development manager at Sage Pastel Payroll & HR.

Madelein van der Watt, development manager at Sage Pastel Payroll & HR.

In 2013 South African Revenue Services collected taxes amounting to R814-billion, an increase of 9.6 percent on total revenue received in 2012.

“More efficient collection systems and the deployment of online technologies such as SARS eFiling have simplified the collection process and made it easier for taxpayers to submit their returns on time,” says Madelein van der Watt, development manager at Sage Pastel Payroll & HR.

“The speed and convenience of using online technology has created a situation where 64% of the total revenue collected for 2012/2013 was received through internet payments.”

Van der Watt adds that the cost of collecting revenue is decreasing thanks to the high technology systems that were put in place as part of the SARS Modernisation Programme. Less human interaction is required as SARS is able to employ fewer people to complete assessments and instead, apply their skills more efficiently. The proof is clearly visible in the numbers supplied by National Treasury. In 2006, 98.8% of returns were paper-based. Today, less than 1% of taxpayers do not submit their returns electronically.

“South Africa boasts a progressive tax system in which the rich subsidise the poor with tax relief being applied in the lower income brackets. There are special rebates applying to individuals in the 65 and 70 age brackets, so elderly people pay less tax.

When Minister of Finance Pravin Gordhan presents the budget on 26 February 2014, we should see this trend continue and expect most of the personal income tax relief to be allocated to lower income earners and the elderly.

Based on the 2012/2013 assessment statistics, 76% of total fringe benefits reported included medical aid payments made by employers on behalf of their employees. A likely increase in the medical aid tax credits for the 2014/2015 tax year will therefore also create welcome relief to many individual tax payers. In addition, medical aid contributors who are aged 65 years and older will also benefit from the tax credit system effective 01 March 2014.

Although tax payers will be glad to put some extra money in their back pockets thanks to personal income tax relief that is most likely to be announced by the Minister of Finance, the relief will be short lived as we can also expect the usual suspects to hit our pockets hard after the budget announcement. “Sin taxes” on alcohol and tobacco products will more than likely be increased to ensure larger revenue collections. Expect an increase on the fuel levy as well and as a result, combined with the recent increase of the repo rate, consumers will have to spend more on their monthly grocery bill.

Minister of Finance Pravin Gordhan calls upon taxpayers every year for input on tax deductions and an area which has been open for debate over the past 3 years is that personal home security expenses should be allowed as a tax deduction due to the lack of service delivery from SAPS and the high occurrence of crime in our country.

To reduce the crime rate, we have to raise the rate of employment in South Africa. Van der Watt says the recent Employment Tax Incentive (ETI) initiative Gordhan introduced as part of the Wage Subsidy proposed in 2010 has been in effect since the beginning of January. The minister is expected to provide feedback in the budget speech on ETI’s expectations in increasing employment for young people aged 18 to 29 years. The legislation allows employers to claim a rebate on their PAYE liability provided their PAYE accounts with SARS are up to date.

The lion’s share of revenue allocation during this year’s budget announcement should likely go to health services, education and social grants. It will be interesting to see whether Eskom and Sanral will receive another round of government funding, especially since e-tolls are now generating revenue since December 2013 and Eskom were allowed a rate increase early last year.

Nifty links:

For more information on the changes that will be announced in the upcoming Budget Speech, on 26 February 2014, book your seat for the Seminar.

For the latest legislative news, connect with Sage Pastel Payroll & HR on Twitter (Payroll News), Facebook or LinkedIn. To read more about the Employment Tax Incentive Bill Seminar, click here.