NOT A GOOD BUDGET FOR EMPLOYERS AND EMPLOYEES

The Budget Speech was most certainly not a typical pre-election budget with the softening of strings to the purse to give voters something back for years of fiscal prudence. There were many announcements which will drive inflation over the coming year, so employers must be acutely aware that employees are probably telling the truth when they complain in the coming year that their take-home pay is simply not enough to make ends meet.

What are the main items which will slowly bleed your employees?

Item Description Impact on Employees
1. No tax rate change Tax brackets and tax rates unchanged Inflation Adjustment Calculator
2. Rebate below inflation Each tax paying employee only gets R153 per year, or R12,75 per month more take-home pay. Inflation Adjustment Calculator
3. Fuel Price increase due to tax on fuel increase In 2018/19 on 93 octane petrol, for each R100 fuel, R34.90 goes to SARS, in 2019/20 this increases to R40,60. Diesel increases from R36,50 per R100 to R41,80. The increase in fuel costs impacts all aspects of living cost, from the cost of food to the cost in getting to work.
4. Carbon Tax effective 05 June 2019 New tax of 9c / litre on petrol and 10c / litre on diesel, with no diesel refund claimable hereon. The same impact as noted above as also increase in fuel cost.
5. Sugar tax increase 01 April 2019 Sugar tax increased from 2.1 cents per gram to 2.21 cents per gram in excel of 4 grams of sugar per 100ml. Cost of consumables increase for employees.
6. RAF Diesel Refund RAF refunds limited on farming, forestry and mining industries. Increase cost of production in all these sectors, passed to employees ultimately.
7. Toll Fees March 2019, all toll fees, including e-tolls, will be increased at nearly 4.6%. Increase cost of transport, so same effect as fuel increase on employees.
8. Sin Taxes Increasing excise duties on alcohol and tobacco products be between 7,4% and 9%. Increases cost of living for many employees.
9. Electricity NERSA announced 9.41% increase 2019/20, 8.1% increase 2020/21 and 5.22% hike for 2021/22. Increase cost of living for employees.

Tax Rates Unchanged

We note below the 2019/20 tax rate tables, applicable from 01 March 2019 to 28 February 2020. As has been announced, these tables are unchanged and everyone only gets R153 per year or R12,75 per month tax relief.

The tax rebates now are –

Medical Credits

Monthly medical scheme contribution tax credits have remained at R310 per month for the first two beneficiaries and R209 per month for each additional beneficiary. 

Travel Allowance 

The employee travel allowance and company car tax claim rates have remained unchanged. SARS issued a new employee logbook document for 2019/20 which are attached for your convenience.

The two important items on the logbook format are –

  • Employees are not required to keep record of private travel and only accurate business travel.
  • SARS accepts electronically kept logbooks.

The old tax rates are repeated below for convenience –

The SARS rate has remained unchanged at R3.61 per kilometre.

Subsistence Allowance

Meal and incidental costs have increased from R416 to R435 and incidental costs only from R128 to R134. There are also various changes to the international rates and please let us know if you need a summary of these changes.

Employee Child Bursaries

Where you have introduced / or are in the process of introducing an employee child bursary scheme, please let us know to incorporate this into the PST model. We have confirmed tax sign-off hereon and also let us know should you wish to consider this tax break for employees with remuneration proxy of below R600,000 per year.

Inflation Adjustment Calculator

We enclose our Inflation Adjustment Calculator and which determines when an employer gives an “inflationary adjustment” to an employee, what the higher real increase must be to ensure the employee’s take-home pay remains protected against the increase in living costs. Please let us know should you or your Remuneration Committee require explanation hereon.

Accuracy between PST and Payslip

It remains critically important that the PST and payslips are aligned, except where employees receive items other than normal remuneration (reimbursements and incentives will necessarily cause differences). There have been instances where payroll settings have been incorrect and this caused incorrect employees’ tax and take-home pay computations. Especially important to note that all employee insurances, directly or indirectly provided to employees are correctly noted and treated in accordance with the PST.

Expatriates

There has been a couple of important SARS Rulings and tax law changes announced on both (a) outbound expatriates – South Africans moving abroad, and (b) Inbound expatriates – foreign workers in South Africa. Where you have these categories of employees, please let us know to send additional information hereon.

Payroll Audit

A number of our clients have asked for a payroll audit to check their system for items not covered by the PST as well as other payroll efficiencies and compliance aspects. Where this is identified in your business, please let us know to discuss our approach.