It was recently announced that the proposed changes regarding how contributions to and how pay outs from RA’s, Provident Funds and Pension Funds will be standardised taxed in future, as well as the proposed increase in annual contribution limits, have been put on hold potentially until March 2017. This is a great pity as the proposed changes were certainly going to be of great benefit to everyone, especially to the lower income earners who want to put more away for their retirement. National Treasury recently put out a press release about this but it offered very little detail. Industry was taken by surprise on this “about turn”, but we must assume that National Treasury have valid reasons for this last minute change. This will most certainly be a topic we will cover in our March 2015 seminars.
RESTRAINT OF TRADE PAYMENT
The Taxation Laws Amendment Bill for 2014 made mention of a proposed change to how these payments should be handled in future. The issue with this is that the definition of gross income in respect of restraint of trade payments has not been correctly linked to the definition as per the Fourth Schedule. This is being looked at and should be resolved soon.
Over the past few years SARS issued a vast number of AA88’s (previously known as ITA88’s) which resulted in a growing administrative issue for many employers, especially the larger employer. Some AA88’s were not processed in the time period allowed by SARS (thus causing a re-issue of the AA88 in the following month), some were not processed due to employees leaving (or not being able to afford the amount due to SARS), and many were issued incorrectly due to an error on SARS’ side. Over the past year SARS has put in a great deal of effort to sort out the majority of the operational and procedural issues and things are beginning to settle down somewhat. However, there are still a vast amount of outstanding AA88’s, and just to compound matters, it is envisaged that there is new batch soon to be issued.
The one area which seems to have been part of the problem is how the AA88 is imported from e@syFile into the employers payroll system, processed within the payroll (taking into account affordability constraints, etc.), and then how the end result is exported back to e@syFile for submission to SARS. Most employers were doing this manually and as such were unable to complete the AA88 process within the time period allowed by SARS. With the ever increasing number of AA88’s, this problem is not going to go away so SARS has initiated a new project together with the Payroll Authors Group to investigate ways to streamline this process within the payroll system and make it easier for employers to manage the AA88’s on a month to month basis. The PAGSA and SARS will be working together over the next few weeks and it is planned that the specifications for how this should be done from a payroll system perspective will be finalised early next year. Payroll suppliers will then in due course need to implement these changes into their payroll systems.
ETI AND ‘GROSSING UP’
An issue was picked up inthe proposed amendments to the ETI Act regarding the 160 hour requirement. The amendments to the ETI Act only provides for two grossing up scenarios – one where the employee’s employed hours are “less than 160 hours” and the other being where the employed hours are “greater than 160 hours”. Seems that the scenario where the employee works for “exactly 160 hours” has not been catered for – it’s a small glitch / oversight but nevertheless its being fixed and we are sure it will be incorporated into the “more than 160 hours” scenario. The whole concept of “grossing up” still seems to be creating huge concerns for Employers and we are hoping for some further clarity from the authorities soon. We will send this out as soon as we get it.
SARS also recently issued a document that specifies how an employer must claim the ETI due after the six month roll over period (i.e. not via the normal monthly EMP201 process). Have a look at the SARS website for the guide.
MEDIUM TERM BUDGET SPEECH
Given that the recent mini budget speech alluded to SARS potentially being short on its revenue target for next year and that a potential increase in taxes may have to be investigated to fill this void, we should be in for a very interesting Budget Speech in 2015. The question that is on everyone’s mind will be - where will the shortfall be recovered from? Will it be an increase in VAT, an increase in PAYE, more AA88’s, an increase in the 40% marginal rate or simply by increasing the tax rates on certain fringe benefits?
At our Tax Year end Seminars in March next year we should be able to answer all these questions, help you understand what the impact will be on employees, and more importantly, share some thoughts and ideas on how these changes need to be implemented in your payroll, so please diarise the dates.
PAYROLL MANAGERS TAX YEAR END SEMINARS 2015
We look forward to seeing you at the Payroll Managers’ Tax Year End 2015 seminars.
09 March 2015 – Cape Town, D’Aria
10 March 2015 – Cape Town, Lagoon Beach
11 March 2015 – Durban, Southern Sun Elangeni
13 March 2015 – Port Elizabeth, Radisson Blu
17 March 2015 – Pretoria, CSIR International Convention Centre
18 March 2015 – Johannesburg, Birchwood Conference Centre
19 March 2015 – Johannesburg, Gallagher
20 March 2015 – Johannesburg, Cedar Park Hotel