On 12 March 2025 we had ‘take two’ of the 2025 Budget Speech. Unlike in previous years where the budget speech was a fait accompli, this year’s budget is still a proposal as it hasn’t been signed off by the various political parties in the GNU. There may still be some horse trading before consensus is reached and the changes are signed off.
There was some nervousness regarding the potential changing of the tax tables, but the various role-players are confident that these tables will remain as they have for the past two tax years. From a payroll perspective we are proceeding based on that assumption.
The following is a summary of the important elements of the budget that affect the payroll environment:
- Personal Income Tax Brackets
There is no adjustment for inflation in personal income tax brackets for the 2025/26 tax year. Bracket creep is now a serious problem as the tax brackets have not changed for the last three tax years.
The 2025 / 2026 tax table:
2. Thresholds and Rates for 2025 / 2026
- 3. Medical Tax Credits
Medical Aid Tax Credits remain unchanged:
- R 364.00 for each of the first two dependents
- R 246.00 for each additional dependent
- Subsistence Allowance
- Meals and incidental costs – R 570.00 is deemed to have been expended per day
- Incidental costs only – R 167.00 is deemed to have been expended per day.
- Reimbursive Travel Rate
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 R 4.76 per kilometre, regardless of the value of the vehicle.
6. Travel Allowance
Rates per kilometre, which can be used in determining the allowable deduction for business travel against an allowance or advance where actual costs are not claimed, are determined using the following table:
- ETI FormulaThe Employment Tax Incentive (ETI) formula and the qualifying income thresholds have been adjusted to align with the recent increases in the national minimum wage. These adjustments ensure that the incentive remains effective in supporting youth employment.
- Other items to note:
- VAT increase of 0.5% effective from 1 May 2025. Although not very common, there are some organizations that hold certain VAT related items in the payroll for fringe benefit calculation purposes (e,g company cars). If the calculation includes a VAT factor, then this will need to be changed as of 1 May 2025.
- Remuneration proxy definition change. Remuneration proxy is used as a method to determine remuneration for the current year, when calculating the fringe benefit implications of items such as bursary eligibility for a relative, the value of employer provided domestic accommodation etc. In the case of an individual earning foreign income which excludes, for tax purposes, the first R 1,250,000 earned by that individual, it results in this amount also being excluded (if earned in a prior year) when calculating remuneration proxy for that individual for the coming year. It is proposed that the definition of “remuneration proxy” in section 1 of the Fourth Schedule be amended to include amounts exempt under section 10(1)(o)(ii) of the Act.
- BCEA earnings ceiling increase: On 7 March 2025, the Minister of Employment and Labour issued a notice (Gazette No. 52232) increasing the BCEA (Basic Conditions of Employment Act) earnings threshold from R 254,371.67 to R 261,748.45 per annum, effective 1 April 2025.
The BCEA earnings threshold determines which employees are covered by specific sections of the BCEA related to working hours. Employees earning above R 261,748.45 per year are excluded from protections under the following sections:
- Section 9: Ordinary hours of work
- Section 10: Overtime
- Section 11: Compressed working week
- Section 12: Averaging of hours of work
- Section 14: Meal intervals
- Section 15: Daily and weekly rest periods
- Section 16: Pay for work on Sundays
- Section 17(2): Night work
- Section 18(3): Public holidays not ordinarily worked
Only employees earning below the threshold receive automatic protection under these sections, including entitlement to overtime pay at 1.5 times the normal hourly wage. Employees earning above the threshold must have these provisions explicitly included in their employment contracts.