In this year’s budget there are some interesting changes that we need to understand and implement. Once we have understood and implemented the changes, then we have to be able to communicate all the changes and make sure that all the policy documents and contracts are up to date. So what are these changes.
1) The tax threshold is now R 63 556.00 per annum or R 5230.00 per month. If your employees earn less than that then you will not be required to deduct PAYE from the salary.
2) The official interest rate is still 6,5% per annum. No changes there
3) Reimbursive travel allowance has been increased to R 3,16 per kilometre. The maximum in terms of kilometres per year remains at 8000km
4) There have been some movement on the tax tables but these will be supplied/downloaded by your payroll service provider or you can download them from SARS
There are two major changes that need to be dealt with:
A) Medical aid deductions.
In the past we have been used to deducting the medical aid benefit from the employees income and then calculating the tax to be paid. A so called tax deduction. This reduced the taxable amount of the employee.
From the first of March you can no longer do this. There will now be a tax credit. What this means is the employees earnings are not reduced and the tax is calculated on the full amount. Only once the tax has been calculated is a tax credit passed. This will reduce the amount of tax to be paid.
You will be entitled to a tax credit of R 230 for the main member and spouse and R 154 for every additional member.
This is seen as a more equitable way of dealing with the medical aids benefit and is also step one for the new NHS.
B) Tax on fringe benefits
From 1 March all Group risk benefits (disability and death) need to be taxed as Fringe benefits. This means that they need to be separated out from the normal retirement funding and taxed accordingly.
If you are in any doubt please speak to your financial advisor or pension fund advisors.