Tag Archive: budget 2012

A Legislative Look at 2013

By Rob Cooper, Director of Legislation Updates and Proposed Legislation at Softline VIP, part of the Sage Group plc.

Rob Cooper

Rob Cooper

The dawn of 2013 brings a number of legislative changes that are looming on the horizon.

Proposed changes to the South African Labour Relations Act (LRA) and the Basic Conditions of Employment Act (BCEA) are on the cards for 2013 in the wake of massive protest action that has crippled the country.  Some of the proposed changes include the fact that minimum wages can be prescribed by the Minister of Labour.  Public officials are also proposed to have the power to prohibit strikes in their sectors.  It is also proposed that Unions must ballot and get majority agreement to strike or picket, but there is strong opposition from Cosatu who see this as a curtailment of their freedom to strike and one wonders whether this will be in the final legislation.

Fortunately, the debate whether labour brokers should be closed down or regulated, seems to have gone the way of stricter regulation.  A decision has however been passed that ‘Atypical’ employees become ‘Deemed’ employees after six months.  The upheaval in the industry has seen the number of labour brokers dramatically reduce from 3,234 in 2010 to 2,685 in 2011.

These proposals have been pushed through Nedlac, despite labour and business differences.  Parliament’s labour portfolio committee is to finalise last ‘discussions’ with amendments to the respective bills having been published on 22 October 2012.  The effective date is yet to be announced.

Employment Equity Act proposals were recently released by Nedlac that will see the act continuing to focus on provincial targets instead of national demographic targets.  Increased fines and powers are proposed in addition to the introduction of the concept of equal pay for work of equal value.  These proposals could quite possibly be rolled out in conjunction with the BCEA and LRA amendments.

South Africa has a Total of 19,5 million unemployed people, of whom 4,5 million are ‘officially’ unemployed in addition to 60% not having a matric.  Of the youth under the age of 25, around 50% are unemployed.  Unfortunately the Youth Subsidy, which had reached a fairly advanced stage, was given the political boot at the ANC’s June policy conference, to be replaced by a ‘Job seeker Grant’, of which there are no details available.  It is expected that more information will be released at the Mangaung elective conference.

Tax Relief for Medical Expenses is expected to change in either March 2013 or March 2014, from a deduction calculation to a ‘Medical Tax Credit’ method of calculation. Contribution expenses for all taxpayers are to be defined, while an assessment method to calculate the tax relief on total medical expenses is to be tabled.  These proposals will result in a gradual reduction of the value of our current tax relief which has been the trend over the past two years.

The National Health Insurance project is set to be a fourteen year project of which the total cost is still being debated.  The Budget 2012 funding options were to increase the VAT rate; or to increase the surcharge on taxable income; or to introduce a payroll tax contribution.  Thus far the Medium Term Budget Policy Statement remained silent on the subject, though a Treasury discussion document is expected soon.

There will be a major move towards the standardisation of retirement funds and there are many reasons for the proposed changes.  The poor performance by some private retirement funds is a major catalyst as is the prevailing low retirement savings level in the country.  Also the tax and administration rules around retirement funds are simply too complex.

The purpose of the change is to ensure that all retirement funds have the same administration and tax rules.  The intention is to utilise the tax and administration rules that are applicable to retirement annuities and to replicate it for retirement funds.  There are many ‘vested interests’ to be protected and it will only be applicable to South African residents.  The roll-out is tentatively planned for March 2014.

Proposals for a National Retirement Fund have also been tabled, which will take the form of a mandatory statutory fund that provides pension, life insurance and disability benefits.  The fund is to be phased in over the next four years and will place pressure on the private sector retirement funds.

Proposed changes to the Unemployment Insurance Act will affect ‘Credit days’ which is proposed to be calculated as one calendar day for every four calendar days employed.  The proposal will also see an increase in the income replacement rate and may remove certain exclusions or limitations in the Act.

The introduction of the virtual UIF office system allows individuals to apply for UIF benefits electronically.  It effectively eliminates the need to queue at the labour office, reduces the cost of ‘accessing’ the benefit and reduces the benefit approval time from about four weeks to 48 hours.

These are just some of the changes lined up for 2013 and we will continue the discussion as we near the budget speech in the New Year.

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


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.