Finance Minister Pravin Gordhan delivered a safe, no real surprises budget today (Wednesday 27 February) with R7 billion personal tax relief, being 2.5 billion less than in the previous tax year 2012/13.
Personal income tax brackets and rebates have been slightly adjusted to reduce the effect of inflation on tax payable. The amount an individual can earn before being required to pay income tax has been increased for the 2013/14 tax year to R67 111 for individuals below the age of 65, R104 611 for individuals between the ages of 65 and 74 and R117 111 for individuals over 75 years.
The annual tax rebates for individuals have been increased. The primary annual tax rebate for individuals under the age of 65 to R12 080, for individuals aged between 65 and 75 to R6 750 and those aged 75 and older to R2 250.
The lowest tax bracket remains at a tax rate of 18% (annual taxable income up to R165 600) and the highest tax bracket remains taxable at 40% (annual taxable income of more than R638 600).
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, a move in line with international best practice. The medical aid tax credit system is also used in the new tax year, commencing 01 March 2013.
Monthly tax credits for medical scheme contributions (reduction of tax payable) will be increased from R230 to R242 for each of the first two beneficiaries on a medical scheme and from R154 to R162 for each additional beneficiary on the medical scheme for the 2013/14 tax year.
“The medical aid tax credit system will likely result in lower earners receiving greater benefits, which is a good thing,” comments Philip Meyer, technology director of payroll and HR software specialist Sage Pastel Payroll & HR.
One of the biggest changes were for individuals whose taxable income is from one employer and is below R250 000 a year. They are not required to submit income tax returns, however they will still be liable to pay income tax. Previously, this annual earnings limit was R120 000. For example, if an individual earns a gross salary of R20 000 per month (no entitlement to commissions or bonuses), they no longer have to file their tax returns.
This means that there will be more pressure on employers to ensure that tax deductions and calculations on payslips are accurate.
Another big proposed change in the Budget Speech effective from March 2014 is that an employer’s contribution to retirement funds on behalf of an employee will be treated as a taxable fringe benefit in the hands of the employee. Individuals will from that date be allowed to deduct up to 27.5 per cent of the higher of taxable income or employment income for contributions to pension, provident and retirement annuity funds with a maximum annual deduction of R350 000.
Contributions above the cap are carried forward to future tax years. Therefore, all company contributions towards pension, provident and retirement annuity funds will become a fringe benefit and it will increase the total tax deduction. If the company contribution is low, it will only have a small impact on the individual. However, if the company contribution towards pension, provident and retirement annuity funds is substantial, it will have a bigger effect on the individual’s net pay and because the taxable earnings are greater, the individual will have to pay more tax.
Environmental taxes go up and will affect a large portion of the RSA population.
From 3 April 2013, the general fuel levy will rise by 15 cents per litre to R2.13 while the Road Accident Fund levy will increase by 8 cents per litre to 96 cents per litre of petrol.
Plastic bag levy – The levy on plastic shopping bags has encouraged consumers to reduce their use. The levy will rise from 4 cents to 6 cents per bag from 1 April 2013.
Incandescent light bulb levy – To promote energy efficiency a levy on incandescent light bulbs was introduced in 2009. The levy is to be increased from R3 to R4 per bulb from 1 April 2013.
Motor vehicle carbon dioxide emissions tax – The tax on motor vehicle carbon dioxide emissions, which is intended to encourage consumers to buy vehicles with lower carbon emissions, will increase from 1 April 2013. For passenger cars, the tax will rise from R75 to R90 for every gram of emissions per kilometre above 120 gCO2/km. In the case of double cabs it will increase from R100 to R125 for every gram of emissions per kilometre above 175 gCO2/km.
Following overseas trends, a policy paper on carbon emissions tax is to be published in 2013 with the view of introducing a carbon tax from 2015.
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 R319 per day. An amount not exceeding R98 per day for incidental costs only will also be exempt.
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.
“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. Currently there are 75 tax certificate totals that need to be considered when producing payslips, therefore manually doing the calculations is a daunting task and errors can creep in easily,” says Meyer.
To find out how the Budget Speech affects your pocket, go to www.pastelpayroll.co.za and enter your current monthly salary and allowances in the free online Sage Pastel Payroll & HR Salary Tax Calculator.
SARS has recently changed the reference number for third party agent appointments from ITA88 to AA88. This change is already available in the latest e@syFile Version 6.2.2. SARS has also updated the guidelines for agent appointments. Go towww.sars.gov.za to view the new Agent Appointment Process and Employer Guide.
Example
John Doe who is 37 years old is employed on a full-time basis. During the 2012/2013 tax year of assessment, John earned a salary of R18,000 per month and a travel allowance of R3,000 per month. During December 2012 John also received a bonus of R15,000 and a taxable bursary of R3,000. John contributes monthly to a Pension fund to the value of R500, a medical aid of R2,300 and he has a deduction towards an income replacement policy of R100 each month. John is the main member on his medical aid, and has two other beneficiaries loaded on the medical aid. Below, please find the tax comparison for John for 2012/2013 vs. 2013/2014 tax year.
John will enjoy a tax saving of R1,696.
|
Calculation |
2012/2013 Tax Year |
2013/2014 Tax Year |
| A |
Salary |
R18,000 |
R18,000 |
| B |
Add Travel Allowance Taxable Portion |
R3,000 * 80% = R2,400 |
R3,000 * 80% = R2,400 |
| C |
Subtract Pension Fund |
R500 |
R500 |
| D |
Subtract Income Replacement Policy |
R100 |
R100 |
| E |
Annual Regular Income [A+(B*80%)-C-D] *12 |
R237,600 |
R237,600 |
| F |
Add to Annual Earnings Bonus |
R15,000 |
R15,000 |
| G |
Add to Annual Earnings Bursary |
R3,000 |
R3,000 |
| H |
Total Annual Earnings [A+(B*80%)-C-D] * 12 + [F + G] |
R255,600 |
R255,600 |
| I |
Tax per table |
R52,980 [((I-R250,000)*30%)+R51,300] |
R52,308 [((I-R165,600)*25%)+R29,808] |
| J |
Less rebate |
R11,440 |
R12,080 |
| K |
Less Medical Aid Tax Credits Per Beneficiaries |
R7,368 [(R230+R230+R154)*12] |
R7,752 [(R242+R242+R162)*12] |
| L |
Tax Payable By Employee Per Year [I-J-K] |
R34,172 |
R32,476 |
| M |
Example of Tax Payable Per Month [L/12] |
R2,847.67 |
R2,706.33 |
Nifty Budget Speech Quick Links:
- Budget Speech Support Tools, view the tools.
- Full Budget Speech Transcript, view here.
- View the new 2013/14 Tax Rates (tax tables), click here.
- Book your seat for the Budget Speech changes Seminar, book now.
- Free online Salary Tax Calculator, use now.
- Try the Free Salary Tax Calculator on your smartphone. Go to m.taxcalc.pastelpayroll.co.za
- Free Online Logbook, click here.
Issued on behalf of Sage Pastel Payroll & HR
To enter the Sage Pastel Payroll Budget Speech competition to win an iPad, click here. Competition closes 8 March 2013.
Positive legislative changes made to the Learnership Allowance Incentive
In the 2013 Budget speech, Finance Minister, Pravin Gordhan, emphasised that one of Government’s most pressing development challenges is to expand work opportunities for young people: “There has been extensive debate on how this should be done and the answer is that a wide range of measures are needed, including further education, training, public employment opportunities and support for job creation in the private sector.”
Learnerships help young people to obtain a formal qualification, while gaining relevant workplace experience. While there are many benefits to the prospective learners, there are also advantages to the employer implementing the learnership. Employers have the peace of mind that their employees are not away from the office for extended periods of time and while they are away, they are improving their relevant work based skills to be more productive and efficient at what they are employed to do.
In 2002, the Government introduced a Learnership Allowance Incentive, for employers to:
However, there is a very specific legislation that guides the process and it poses certain challenges. Tax Talk spoke to Rob Cooper, tax expert and Director of Legislation Updates and Proposed legislation at Sage VIP, part of the Sage Group plc, about some of the recent changes made to the Learnership Allowance Incentive.
Cooper says: “To encourage employers to participate in learnerships, an allowance in the form of a deduction from the company’s taxable income has been available for many years. To qualify for the learnership allowance, employers must register the learnership with SETA. There is a R30 000 allowance at the start of the learnership, and a further R30 000 upon the successful completion. The value of the actual incentive has always been influenced by the when the learner is registered and the learner’s failure to complete. However, with new legislation introduced in January, the scenario will change.”
Cooper explains: “In the past, the allowance (deduction) was only allowed during the year in which the learnership agreement was officially registered with SETA. For a variety of reasons, registration often takes a couple of months and this resulted in reduced value.”
“In future, employers will no longer have to register learnerships from the moment of the inception. A learnership will be deemed to have been registered for the duration of the agreement that falls within the employer’s year of assessment. However, it is necessary that the learnership is registered within 12 months after the year of assessment.”
“The second issue relates to failure to complete. In the past, the allowance was not granted if the learner previously failed to complete a prior registered learnership of similar nature to the new learnership. Typically, the employer was not aware of prior learnerships (i.e. the information was not easily accessible or the quality of the information was not reliable, as it is dependent on feedback from other employers). Attempts to obtain this information also delayed the registration process.”
“In future, employers will no longer have to find out details of the individuals’ learnerships entered into with other employers. Learnership allowances will only be refused if the learner failed the same type of learnership with the same employer (or associated institution).”
”Implementing a learnership programme within your company will definitely contribute to job creation, especially for young people. However, it is important to keep track of all the legislative changes. Make sure that your company is operating within the parameters of the basic conditions of employment and its legal requirements. It is crucial to being a responsible citizen,” concludes Cooper.
For more information, employers are invited to attend the Sage VIP, Payroll and Tax Seminar. You can book your seat at: www.vippayroll.co.za.