As South Africans are lifting their heads after the peak of the second wave of COVID 19 employees and employers braced themselves for the budget speech to be delivered.
Mr. Tito Mboweni had an extremely challenging task to deliver this message to the South African nation.
Many employees and the payroll community could feel relieved as the anticipated slaughtering of the loyal, legislatively compliant base of registered taxpayers did not realise but a realistic change in personal income tax was announced.
There are some notable pros and cons in the budget. For the most part employees will have a bit more in their pockets due to the increase of the tax brackets above the inflation rate.
With no extraordinary measures aimed at the workforce and PAYE contributing community the below Summary of changes:
Retirement Fund Reform
The contributions to pension funds, provident funds, and retirement annuity funds (RAs) are still subject to the same rules regarding deductibility. The annuitization of provident funds will take effect from 1 March 2021. This will enable all workers to continue to enjoy tax deductions on their contributions.
In terms of the annuitisation rules, members of retirement vehicles (pension fund, provident fund, or RA), will be subject to similar rules regarding access to cash on retirement.
Members of all retirement funds will only be able to take one-third of the total value of their retirement fund interest by way of a lump sum with the balance being taken as an annuity and these are subject to exceptions.
These exemptions include one where the total retirement interest does not exceed R 247 500, in which case the full amount may be taken in cash.
These restrictions will only apply to amounts contributed to funds on or after 1 March 2021 and not to members who are close to retirement. So, the rules will not apply to:
the credit in the fund as of 1 March 2021 and subsequent fund return on that amount: or
members of provident funds and provident preservations funds aged 55 years and older on 1 March 2021 who will be entitled to take their full benefits on retirement (including the fund return) as well as any contributions made to the provident fund after 1 March 2021.
Travel and work-from-home (WFH) benefits are under review
National Treasury will review current travel and home office allowances to investigate equity in the application, simplicity of use, and certainty for taxpayers.
Further information can also be obtained by accessing the following links:
If you are making use of LabourNet’s online payroll solution we anticipate upgrading the payroll application with the relevant changes on Thursday 04/03/2021, which will enable you to already process your payroll for March based on the latest tax changes as per the budget speech.
Please do not hesitate to contact our helpdesk on 087 551 7193. For any assistance or more information relating to our online payroll platform designed specifically to simplify payroll matters.
Please feel free to make use of our online tax calculator to get an indication of what the impact of the budget speech will have on your personal income.
For more information on the above topic, please contact the LabourNet Helpdesk at
0861 LABNET (0861 522638).
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