Travelling Allowance 2018/19

Rates per kilometre, which may be used in determining the allowable deduction for business travel against an allowance or advance where actual costs are not claimed, are determined by using the following table:

Value of Vehicle
(inc. VAT) (R)
Fixed Cost
(R p.a.)
0 – 85 000 28 352 95.7 34.4
85 001 – 170 000 50 631 106.8 43.1
170 001 – 255 000 72 983 116.0 47.5
255 001 – 340 000 92 683 124.8 51.9
340 001 – 425 000 112 443 133.5 60.9
425 001 – 510 000 133 147 153.2 71.6
510 001 – 595 000 153 850 158.4 88.9
Exceeding 595 000 153 850 158.4 88.9


80% of the travelling allowance must be included in the employee’s remuneration for the purposes of calculating PAYE. The percentage is reduced to 20% if the employer is satisfied that at least 80% of the use of the motor vehicle for the tax year will be for business purposes.

No fuel cost may be claimed if the employee has not borne the full cost of fuel used in the vehicle and no maintenance cost may be claimed if the employee has not borne the full cost of maintaining the vehicle (e.g. if the vehicle is covered by a maintenance plan).

The fixed cost must be reduced on a pro-rata basis if the vehicle is used for business purposes for less than a full year.

The actual distance travelled during a tax year and the distance travelled for business purposes substantiated by a log book are used to determine the costs which may be claimed against a travelling allowance.

Alternative simplified method:

Where an allowance or advance is based on the actual distance travelled by the employee for business purposes, no tax is payable on an allowance paid by an employer to an employee up to the rate of 361 cents per kilometre, regardless of the value of the vehicle. However, this alternative is not available if other compensation in the form of an allowance or reimbursement (other than for parking or toll fees) is received from the employer in respect of the vehicle.

Income Tax Rates and Thresholds 2018/19

Tax rates for the period 1 March 2018 to 28 February 2019 for individuals and special trusts:

Taxable Income (R) Rate of Tax (R)
0 – 195 850 18% of taxable income
195 851 – 305 850 35 253 + 26% of taxable income above 195 850
305 851 – 423 300 63 853 + 31% of taxable income above 305 850
423 301 – 555 600 100 263 + 36% of taxable income above 423 300
555 601 – 708 310 147 891 + 39% of taxable income above 555 600
708 311 – 1 500 000 207 448 + 41% of taxable income above 708 310
1 500 001 and above 532 041 + 45% of taxable income above 1 500 000

Trusts other than special trusts: rate of tax 45%


Primary R14,067
Secondary (Persons 65 and older) R7,713
Tertiary (Persons 75 and older) R2,574

Age Tax Threshold

Below age 65 R78,150
Age 65 to below 75 R121,000
Age 75 and over R135,300

March 2018 Budget Highlights for Payroll

Employment Tax Incentive Act and Special Economic Zones (SEZ’s)

In the budget speech, the Minister of Finance stated that he has Gazetted a notice creating six Special Economic Zones. The link between ETI and SEZ’s is created within Section 6 of the Employment Tax Incentive Act which provides the criteria that must be satisfied before an employee can qualify to generate the tax incentive for the employer. One of those conditions is that of the age of the employee.

The portion of section 6 that is relevant to SEZ’s is section 6(a)(ii) which states:

Qualifying employees. An employee is a qualifying employee if the employee- (a)

  • is not less than 18 years old and not more than 29 years old at the end of any month in respect of which the employment tax incentive is claimed;
  • is employed by an employer operating through a fixed place of business located within a special economic zone designated by notice by the Minister of Finance in the Gazette and that employee renders services to that employer mainly within that special economic zone; or

The Gazette published by the Minister of Finance now links the six SEZ’s to section 6(a)(ii).

This means that there is no age qualification test for employees who render services mainly within one of the six designated SEZ’s to an employer whose business is located within that SEZ.

Note that the Special Economic Zones that have been in existence for quite some time were created by the Minister of Trade and Industries, not by the Minister of Finance, and therefore were not linked to the requirements of section 6(a)(ii) of the ETI Act.

It is not yet clear when the effective date of the SEZ’s being incorporated into the Employment Tax Incentive Act.

Subsistence Allowance Limits (effective 1 March 2018)

For South Africa, the daily limits are as follows:
Incidental expenses: R128 per day
Meals and incidentals: R416 per day

For any country outside of the borders of South Africa, there is a daily limit per country. The list of these countries with their limits is available on the SARS website.

Medical Tax Credits (effective 1 March 2018)

The monthly values per person are:

2017/18 2018/19
Principal member R303.00 R310.00
First dependent R303.00 R310.00
Per subsequent dependent R204.00 R209.00

When are loans a fringe benefit for an employee?

The legislation in this regard remains unchanged.

Loans in aggregate of less than R 3 000 at any one stage do not attract any fringe benefit tax. If the loan exceeds this value though, SARS will raise a fringe benefit based on the SARS interest rate applied to the loan balance. This fringe benefit will be added to the employee’s taxable remuneration that month. Generally payroll systems will do this calculation for you provided you notify the payroll administrator of the loan balance, the agreed monthly repayments and whether an interest rate is applied to the loan. If this interest rate is equal to or higher than the SARS official rate (currently 7.75%) no fringe benefit will be applicable. If it is lower the payroll will tax the difference monthly.

Tax Treatment of Severance Benefits

For years, payroll administrators, tax consultants, accountants and human resource consultants have battled to get their heads around the tax treatment of tax directives pertaining to ‘voluntary’ retrenchments. There was a generally prevailing opinion that a ‘voluntary’ retrenchment did not qualify for the favourable tax treatment given to ‘involuntary’ retrenchments. The logic of this was that the employee had chosen to leave employment and that the termination was akin to a ‘mutual termination’. In reality though the concepts are far removed from each other from a tax treatment perspective. This article will focus on the concept of ‘retrenchment’ as a means of reducing the number of employees due to the closing of the business or for economic or restructuring reasons.

In a recent development the South African Institute of Tax Professionals (SAIT) made a submission to SARS stating that the concept of ‘voluntary retrenchment’, as opposed to forced retrenchment, exists in employment law. The courts have held that voluntary retrenchment agreements are valid and enforceable contracts.

Erika de Villiers, head of tax policy at SAIT, says that in the latest guide relating to tax directive forms SARS clearly makes a distinction between voluntary retrenchment and involuntary retrenchment. This new classification appears to reflect an interpretation that in the case of a voluntary severance package, the employee does not qualify for the more favourable tax treatment applicable to a severance benefit.

In terms of the tax tables for severance benefits, the first R 500 000 is tax free and the remaining amounts are taxed at a sliding rate, with 36% being the top rate. It is interesting to note that the voluntary retrenchment option is processed by SARS in the same way as normal taxable income, with the normal tax tables applicable to individuals being used. In such cases the IRP 5 source code used to report such income would be 3601 (normal taxable income).

The SAIT submission states that the Income Tax Act does not differentiate between voluntary and involuntary retrenchment packages. The definition of ‘severance benefit’ deals with amounts paid on retrenchment for an employee, and does not refer to the terms ‘voluntary’ or ‘involuntary’. Erika de Villiers says that SAIT is of the view that the SARS Completion Guide for the forms should be updated in order not to differentiate between ‘voluntary’ and ‘involuntary’ retrenchment.

SARS has been receptive to these comments and have stated that they will be amending their guides and forms in due course to reflect the change in policy. De Villiers says that in the interim SARS accepts that the voluntary retrenchment packages should be disclosed under the ‘involuntary’ retrenchment field on the application form, to ensure that the payment is treated correctly.

It is also important to note that should an employer negotiate a more favourable voluntary retrenchment package payable due to the operational reduction of staff, this payment will still fall within the definition of ‘severance benefits’ and qualify for the favourable severance benefit tables.

This certainly creates a complication for employers who have followed the policy currently in practice at SARS. Tax directives may need to be cancelled and new applications made. There is unfortunately only a small window of opportunity to do this before the 2018 tax year closes.

Increases in Wages – Domestic Workers

The Minister of Labour, Mildred Oliphant, had the pleasure of announcing that: “wages for the vulnerable workers in the Domestic Worker Sector will be adjusted with effect from 1 January 2018”.

In terms of Sectoral Determination 7: The minimum wages will be adjusted upwards for employees.

  • This means that an employee that works more than 27 hours in Area A (largely urban areas) should be paid not less than an hourly rate of R13.05.
  • Secondly, for an employee that works less than 27 hours in Area A should be paid not less than an hourly rate of R15.28.
  • Thirdly, for an employee that works more than 27 hours in Area B (largely rural areas) should be paid not less than an hourly rate of R11.89.
  • Fourthly, for an employee that works less than 27 hours in Area B should be paid not less than an hourly rate of R14.03.

The new determination will be effective until the end of December 2018 (following which a new determination will be issued).

Sectoral determination covers the protection of workers in vulnerable sectors/areas of work. The determination sets minimum working hours, minimum wages, number of leave days and termination rules.

National Minimum Wage Bill

On Friday, 17 November 2017 the Department of Labour published the National Minimum Wage Bill, 2017 (“the NMW Bill”) and the Basic Conditions of Employment Amendment Bill (“the BCEA Bill”) for public comment, pertinent aspects of both are discussed below.

The National Minimum Wage Bill, 2017

The purpose of the NMW Bill is to advance social economic development and social justice by improving the wages of the lowest paid employees, by protecting employees from unreasonably low wages, by preserving the value of the national minimum wage and by promoting collective bargaining and supporting economic policy.

In order to achieve the aforementioned goals, the NMW Bill seeks to provide for a national minimum wage and establish a National Minimum Wage Commission (“the Commission”) which is intended to implement the provisions of the National Minimum Wage Act, 2017 (“the Act”).

The NMW Bill, in its current form, specifies a national minimum wage of R20,00 for each ordinary hour worked. The NMW Bill further specifies that farm workers, domestic workers and workers employed on an expanded public works programme should be paid a minimum wage of R18,00, R15,00 and R11,00 per hour, respectively. Workers who have concluded learnership agreements will also be entitled to allowances, depending on their qualifications, ranging from R301,01 to R1 755,84 per week.

The NMW Bill further prescribes that the payment of a national minimum wage takes precedence over any contrary provision in any contract, collective agreement or law, except a law amending the Act. The national minimum wage must also constitute a term of the employee’s contract except to the extent that the contract, collective agreement or law provides for a wage that is more favourable to the employee.

Furthermore, the national minimum wage is calculated as being the amounts above excluding any payment made to enable an employee to work including transport, equipment, food or accommodation allowance, any payment in kind, which includes board or accommodation, gratuities including bonuses, tips or gifts and any other prescribed category of payment.

If an employee is paid on a basis other than the number of hours worked, the employee may not be paid less than the minimum wage for the ordinary hours of work. Furthermore, it would constitute an unfair labour practice where employers unilaterally alter hours of work or other conditions of employment when the national minimum wage is implemented.

However, the NMW Bill empowers the Minister, on application by an employer, to grant exemptions for payment of the national minimum wage in certain circumstances. The exemption granted must specify the period for which it is granted, which may not be longer than a year, it must specify the wage that the employer is required to pay its employees and any other relevant condition. This may offer some relief to small employers that are genuinely unable to pay employees wages in line with the prescribed minimum.

The NMW Bill also makes provision for the establishment of the Commission to review the national minimum wage and to make recommendations annually for the adjustment of the national minimum wage. The Commission may also investigate the impact of the national minimum wage on the economy, collective bargaining and income differentials.

The Act is to commence on 1 May 2018.

Employment Tax Incentive

Employment Tax Incentive – Claiming when not reported in a specific month.

The Income Tax Act allows employers to claim Employment Tax Incentive (ETI) until the end of each six-month cycle. As each six-month cycle ends with the EMP501 employer reconciliation process it seems obvious employers should be able to claim ETI up until their EMP501 is submitted. Not so according to the e@syfile software.

Assuming an employer has not submitted an ETI claim on the EMP201 for a particular month the obvious ways to claim during the six-month cycle would be to either add the additional valid claim on to the EMP501 or to amend the EMP201 for the month where the ETI should have been claimed (had all info been available at the time).

  1. Adding to the EMP501 – when one tries to do this e@syfile records an error stating that one cannot claim ETI on an EMP501 that is not reflected on the EMP201;
  2. Amending the EMP201 – e@syfile no longer allows the amendment of the EMP201 for ETI claims when the filing period to which it relates is finished.

E@syfile therefore prevents one from claiming the ETI within the six-month cycle. The best solution we understand is to use the Automated PAYE Dispute Management Process, but this is still to be tested fully.

UIF – As Applied to Learners

For a couple of years the Department of Labour has been talking about changes to the benefits to be provided to qualifying employees. These proposed changes have been widely published and discussed in payroll forums and at seminars.

The changes to the Unemployment Insurance Act, signed into law on 19 January 2017, have yet to be made effective. This Act deals with the payment of benefits, with changes to the ‘application’ of the Unemployment Insurance Act being introduced. Indications are the effective date will be 1 March 2018, but this remains to be seen.

The 2017 Bills make related changes to the ‘application’ of the Unemployment Insurance Contributions Act, which deals with contributions.

For both Acts, the provisions that excludes learners in terms of the Skills Development Act from contributing and being eligible to claim benefits, have been deleted. Once effective, the result of these changes is that all learners must contribute, and consequently be eligible to claim benefits.

Note however that both Unemployment Insurance Acts define an employee as per the Fourth Schedule of the Income Tax Act and exclude common law independent contractors, even if paid deemed remuneration (income reflected against IRP 5 code – 3616). The Fourth Schedule also defines the remuneration on which the contribution must be calculated, with some special exclusions. In my understanding, these exclusions do not apply to the learnership situation, and all learners will have to contribute.

To conclude, all learners will have to contribute, unless they are not an employee as defined, and contributions must be made unless the remuneration value is zero.