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How the 2013 Budget Affects Payroll

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On the 27th of February, our Finance Minister, Pravin Gordhan, gave his budget speech. Every business magazine and newspaper has dissected this budget to the bare essentials to make it better known to us. Most people understand the implications the budget has for them. I do not want to dwell on all the comments already made, but will highlight a few of the points of the budget. My main purpose it to show how the budget will affect payroll and what the payroll administrators should be aware of.

Minister Gordhan expressed the need for the 2013 budget to support the ANC’s National Development Plan that they announced in their Manguang conference in December 2012. He stated that the money would be shifted from those departments not utilising their budgets to those departments that would be in need of the money to implement the NDP. This budget, because of this, focused on the social elements with social grants being increased and more money being allocated to health and education.

He also announced that there would be more focus given to eradicating corruption. In addition he spoke of audits being performed on those who rendered services to the state. He announced that these companies would now be scrutinised by SARS.

The good news of the budget was the R 7 Billion tax relief to tax payers. The bad news was that from the 1st April 2013 the fuel levy would increase by 23c per litre. Also those who enjoy cigarettes and alcohol would now be paying extra.

What does this all mean for payroll? The tax relief means new tax rates on the tables. The new statutory tables are as follows:

Taxable Income (R)
Rates of Tax
R0 - R165 600 18% of each R1
R165 601 - R258 750 R29 808 + 25% of the amount above R165 600
R258 751 - R358 110 R53 096 + 30% of the amount above R258 750
R358 111 – R500 940 R82 904 + 35% of the amount above R358 110
R500 941 - R638 600 R132 894 + 38% of the amount above R500 940
R638 601+ R185 205 + 40% of the amount above R638 600

 

Rebates
This Year
Primary (All Taxpayers) R12 080
Secondary (65 years and over) R 6 750
Tertiary (75 years and over) R 2 250

 

Tax Threshold
This Year
Below 65 years R67 111
65 years and over R104 611
75 years and over R117 111

As from the previous year, we can see that the tax threshold is now well in excess of the R 60 000 SITE limit. This means that SITE is no longer a part of the SA tax system even if it is still mentioned in the Income Tax Act. SARS does not allow codes to be reported with a zero value which will mean that the code for SITE will be left off the certificates as it will be zero.

Payroll administrators will have to check the new table for estimating travel allowances, Determined Rates table, as this has changed. No other changes to the travel allowances were made except that the rate per kilometre for re-imbursive allowances was increased from R 3.15 per kilometre to R 3.24 per kilometre.

The rates of the local subsistence allowances have been increased. These rates are now:

R 98 – Incidental costs only;
R 319 – Meals and incidental costs.

The rates for the international subsistence have remained as per the publication by SARS, and at the time of writing this, the latest publication was March 2012.

The rates for the Medical Tax Credits were also increased to the following values:

R 242 per month for the 1st member
R 242 per month for the 2nd member
R 162 per month for each additional member.

Employees who are 65 years and older will be changed to the new Medical Tax Credit scheme, as introduced from 1st March 2012, from the next tax year commencing on the 1st March 2014.

The only other changes were the tables for Lump Sum Severance benefits and Lump Sum Withdrawal benefits, which hardly ever affect payroll.

Overall, as mentioned by many of the tax commentators, this was a very conservative budget. Minister Gordhan had to take into account the current economic climate and due to this had very little to work with.

The major question that does need to be asked, if our state debt is R 1.7 Trillion, what will our debt servicing costs be in the years to come? Will this be a problem for the next generation to resolve?