The Budget has unsurprisingly grabbed the lion’s share of our attention over the last week and we were fortunate enough to grab a moment of time from CRS business partner, Jerry Botha, who shared some valuable insight, which you can read below.
Jerry makes an excellent point in reminding us that while the budget will bring the associated compliance requirements, the real challenge awaits us later in the year when we begin grappling with the Tax Amendment Bills. Also important are the changes in fringe benefits in respect of company cars, details of which are below.
Many of you may have caught our live reads on radio over the past week. We are delighted by the response we are receiving for CRS Compact – our new, enterprise ready HR and payroll software for the SME market. If you want to read more, please follow the spotted dog on our home page …
Training is such an important part of our business. This year, CRS will be working closely with our business partners, Faranani Facilitation Services who will be running seminars on ROI, the first of which takes place in March. We invite you to join us at this seminar, the details of which are below.
Lastly, our apologies for the delay in getting this issue to you but we felt it better to carefully digest and unwrap the Budget in order to add value to your business through considered insight.
Until next time,
A conservative budget – but the real challenge is still to come
The generally conservative 2011/12 budget delivered by Minister Gordhan has been met with cautious approval from businesses. However, it brings the usual stress and strain for the payroll and HR professionals who will have to deal with line implementations and educate staff about the changes.
“As usual, the devil is in the detail, we are still unpacking the budget and I expect we will have more clarity over the next few weeks. For the moment though, companies should be ensuring they are fully compliant and that their payroll service providers are on top of the changes,” says Jerry Botha, partner at Tax Consulting and consultant to CRS Technologies.
Some of the more notable changes to this year’s budget include the following:
- Starting in March 2012, an employer’s contribution will be treated as a taxable fringe benefit, and employees will be able to deduct up to 22.5% of taxable income for their contributions to approved retirement funds. A maximum of R200,000 a year will be deductible. It is also proposed that the one-third lump sum withdrawal amount allowed from pension fund and retirement annuity funds should be extended to provident funds as well.
- Payroll, VAT, tax surcharges have been mooted for the NHI, although the Minister did say this was still up for debate.
- A medical credit system was mentioned, but again, not much detail was provided.
- Although the travel rules have remained the same, the travel rate was increased from R2.92 per kilometre to R3.05
- According to the Treasury, taxpayers with an annual taxable income of up to R270,000 would now receive 50% of the proposed tax relief, those with income of between R270,000 and R580,000 would receive 33%, and those with income of between R580,000 and R1 million would receive 12%. Those earning more than R1 million would receive 5% of the proposed tax relief.
Botha says the new medical aid and pension rules will require major system configuration, not only for payroll, but also for fund rules and potentially even employment contracts.
The company vehicle and travel allowance tax rules, which become effective 01 March 2011, require employers to effect necessary changes to policy and to ensure risk management and best practice treatment. The same applies to business equipment, where the policy must be correctly worded.
While not much surprise was registered at the budget vote, Botha has cautioned payroll practitioners and business owners that the Tax Administration Bill will almost certainly come into play later this year.
“This will place a major burden on companies. It will become imperative that they are fully compliant – or face severe penalties,” he warns.
Company Cars – legislative changes to fringe benefits
Effective 1 March 2011 the calculation of tax on company cars has changed.
The calculation used to be based on 2.5% of the cost of the car exclusive of VAT. The rate has now increased to 3.5% of the cost of the vehicle INCLUSIVE of VAT where there is no valid maintenance contract included in the purchase price or where a valid maintenance plan is included in the purchase price the percentage can be reduced to 3.25%.
If more than 80% of the kilometres travelled in the year of assessment relate to business travel then the PAYE may be calculated on 20% of the calculated value of the vehicle above. In all other cases 80% of the calculated value is subject to PAYE on a monthly basis.
Please also note that the 80% or the 20% must be used for the full year.
For employees to make use of the lower rate it is required that they keep an accurate logbook.
Tax threshold for the elderly: software upgrade
The budget speech made provision for a new age tax threshold bracket for employees 75 years and older to qualify for a tertiary rebate of R2000. Employers who do not have employees of 75 years and older at 29 February 2012 can simply import the new tax tables. Employers who do, must upgrade to v 4.03SP1b, which will be available from 7 March 2011.
Please contact your regional manager or consultant should you need more information.
Measuring and managing training
The vital role of training is often overlooked or poorly understood by managers, especially if the training means taking workers away from their daily routines. Many financial directors are asking whether they are getting financial and performance returns on what they are investing in training.
Understanding how to measure and show return on investment can go a long way to solving this problem. More than that though, implementing proper qualitative measurements can assist companies better manage their budgets and their staff skills and development.
This year, CRS will be working closely with our business partners, Faranani Facilitation Services. They will be running seminars on ROI, the first of which takes place on the 17th of March. We invite you to join us at this seminar, the details of which are below.
Facilitators: Deborah Williams (Managing Director Faranani) and Dr Belinda Ketel (Faranani Associate)
Venue: Kelvin Grove, Newlands, Cape Town
Date: 17th March 2011(Bookings close 14 March)
Seminar Times: 8.30—4.30 (Registration: 8am)
Cost: R1195 excl VAT (Discount 10% for groups of five or more)
Enquiries: Lynne-Jay Williams on 021 762 5742
We continue to offer a selection of training on our modules. Please click here for the dates and venues.