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| Editor's Note |
In this edition, we include a number of practical notices relevant to employers:
| 1. |
A reduction by 25 basis points in the official rate of interest; |
| 2. |
A circular from the MEIBC on their Dispute Resolution Process and Levies; |
| 3. |
A comment on the appeal of the Assign Case to the Constitutional Court and the implications for employers until the court rules on the matter; and |
| 4. |
A note that the annuitisation requirements for provident funds have been postponed until March 2019 |
We then include an article on the 2017 Draft Taxation Laws Amendment Bill.
Finally, we include another warning to clients about the Department of Labour and their drive to ramp up audits in the employment equity space.
As usual, should you require any further detail on any of these topics, please feel free to contact us. |
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| Table of Contents |
1. 2017 Draft Taxation Laws Amendment Bill
2. Postponement of Annuitisation Requirement for Provident Funds to March 2019
3. Department of Labour - Employment Equity Inspection Targets
4. Temporary Workers Ruling - Assign Case - Impact of Appeal on Employers
5. Changes to the Official Interest Rate for Fringe Benefits
6. Metal & Engineering Industry Bargaining Council (MEIBC)
7. Contact HRTorQue |
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| 1. 2017 Draft Taxation Laws Amendment Bill |
| Author: Jonathan Aitken |
On 19 July 2017, National Treasury published the following amending legislation:
1. Draft Taxation Laws Amendment Bill (TLAB)
2. Draft Tax Administration Laws Amendment Bill (TALAB)
While the draft legislation still needs to be approved, the following items in the legislation are most relevant to payrolls.
TLAB Main Proposals
1. Bargaining Councils PAYE non-compliance.
Some bargaining councils have for many years not withheld PAYE from members for holiday, Sick leave and end-of-year payments. It is proposed that a levy is introduced as form of limited recovery of the taxes owing. At this stage, the impact on payrolls is uncertain, although there is a strong likelihood that payrolls will have to assist non-compliant councils with calculations going back over 5 years.
2. Introducing further changes to the anti-avoidance rules for certain share schemes, mainly to do with trusts.
3. Removing the 183/60 day tax exemption for South African tax residents earning income from services provided outside of the borders of South Africa.
The purpose of this change is to prevent double non-taxation, but it is certainly not going to be popular.
4. Increasing the tax exemption threshold for bursaries granted in respect of the education of those employees (or their relatives) with disabilities.
Various forms of tax relief for different circumstances are proposed.
5. Clarifying the rules relating to the taxation of employee-based share schemes, and introducing more anti-avoidance rules.
6. Making a number of changes to the taxation rules regarding retirements funds, including the postponement of the annuitisation requirement for provident fun payouts to 1 March 2019.
7. Clarifying that the hours used for the '160-hour' determination for section 4(1)(b)(ii) of the Employment Tax Incentive Act are the hours defined as "ordinary hours" by the Basic Conditions of Employment Act (which would then exclude 'premium' hours).
TALAB Main Proposals
1. Spreading the R350 000 pa monetary cap that limits the deduction allowed in respect of contributions to retirement funds over 12 months.
2. Including only the portion of the travel reimbursement that is calculated at a rate per kilometre that exceeds the prescribed rate per kilometre in remuneration.
Note, the 2017 budget proposal to reduce or remove medical tax credits (as discussed in the recent NHI White paper) to help fund the National Health Insurance project, has not been taken forward in the draft Amendment Bills. |
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| 2. Postponement of Annuitisation Requirement for Provident Funds |
| Author: Dave Beattie |
Postponement of Annuitisation Requirement for Provident Funds to March 2019
In 2015 amendments were made to the Act regarding the tax treatment of provident funds in order to enhance preservation of retirement fund interests during retirement. As a result, provident funds will be treated like pension and retirement annuity funds and will be required to annuitise benefits. This implies that on retirement, members of the provident fund will be permitted to take up to a third of the retirement benefit as lump sum and annuitise at least two thirds. However, this will only be applicable for contributions made to a provident fund after the implementation date. All contributions made before the implementation date, and growth on those contributions, may still be taken as a lump sum on retirement.
The above-mentioned amendments were supposed to come into effect on 1 March 2016. Government came under pressure from the unions regarding this proposal and in February 2016 postponed the annuitisation requirements for provident funds for two years until 1 March 2018. The reasoning behind this postponement was to provide sufficient time for the Minister of Finance to consult with the various interested parties. These included the National Economic Development and Labour Council (NEDLAC), who would be consulted regarding the annuitisation requirements for provident funds after the publication of the comprehensive policy document on social security. The Minister of Finance would also need to report back to Parliament on the outcome of those consultations no later than 31 August 2017.
Several changes have taken place since the postponement of these amendments and the discussions on the comprehensive paper on social security are still underway in NEDLAC. In view of the above it is proposed that the provisions relating to the annuitisation requirements for provident funds be postponed for 1 year from 1 March 2018 to 1 March 2019.
The proposed amendments will come into effect on 1 March 2019 and apply in respect of years of assessment commencing on or after that date. |
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| 3. Department of Labour - Employment Equity Inspection Targets |
| Author: Nicky Hardwick |
Editor: We have been stressing for a while the emphasis placed on employment equity audits to raise funds for the Department of Labour. This is supported by the statistics below and our own anecdotal experience from clients.
The Department of Labour have indicated the following planned inspection targets for 2017 / 2018.
| Dol Reviews |
Annual Target |
Q1 |
Q2 |
Q3 |
Q4 |
| 1. EE DG Reviews (EEA) |
192 |
38 |
58 |
38 |
58 |
| 2. EE Inspections (EEA) |
900 |
180 |
270 |
180 |
270 |
| 3. Vulnerable workers (BCEA) |
35,496 |
7,099 |
10,649 |
7,099 |
10,649 |
| 4. High Risk Sectors (OHS) |
5,520 |
1,104 |
1,656 |
1,104 |
1,656 |
| 5. Employer Audits (UIA) Procedural |
2,160 |
432 |
648 |
432 |
648 |
| 6. UI Payroll Audits |
218 |
43 |
65 |
43 |
65 |
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| 4. Temporary Workers Ruling - Assign Case - Impact of Appeal on Employers |
| Author: Jonathan Aitken |
In our July edition, we talked about the recent Assign Case in which the Labour Appeals Court concluded labour broker supplied temporary workers who worked for an employer (and earned below the BCEA threshold) were effectively employees of that employer and not dual employed with their labour broker.
The case has been appealed to the Constitutional Court.
The implication for employers is that the practical situation reverts back to the treatment of these temporary workers as being "dual" employees of the labour broker and the client until the Constitutional Court rules on the matter. |
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| 5. Changes to the Official Interest Rate for Fringe Benefits |
| Author: Karen van den Bergh |
The Official Interest Rate for calculating Fringe Benefits decreased by 0.25 % effective 1st August 2017.
Where an employer gives an employee a loan that is less than the official interest rate or interest free, the difference between the two must be taxed as a taxable Fringe Benefit. This Fringe Benefit should be processed via the payroll and reported on the Employees IRP5 against SARS Code 3801.
The Official Interest Rate is defined in the Seventh Schedule as the rate of interest that is equal to the Repo Rate, plus 100 basis points (1%).
The repo rate was decreased from 7% to 6.75% on the 21st of July 2017, which means the deemed interest rate dropped from 8% to 7.75% effective 1st August 2017. |
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| 6. Metal & Engineering Industry Bargaining Council (MEIBC) - Notice |
| Author: Jonathan Aitken |
Metal & Engineering Industry Bargaining Council (MEIBC) - Notice by MEIBC on dispute resolution collective agreement.
This notice is replicated from a circular by the MEIBC dated 24 July 2017.
On 21 July 2017 a Special MANCO of the MEIBC resolved to amend and extend the period of operation of the Dispute Resolution Agreement which provides for the dispute resolution procedures in the industry as well as a dispute levy, for a further period ending 31 March 2020.
Parties have also resolved that an application be made to the Minister of Labour to extend this agreement to non-parties.
DISPUTE RESOLUTION LEVY (Per employee):
| Per Week |
Per Fortnight |
Per Month |
| R0.71 |
R1.42 |
R3.07 |
The employer pays a matching contribution per employee - thus total contributions per month per employee:
Dispute Resolution Levy Total: R6.14 per month
Note that the dispute resolution levy is also payable by administration staff. |
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| 7. Contact HRTorQue |
Durban
Phone: 031 564 1155 • Email: [email protected] • Website: www.hrtorque.co.za
Address: 163 Umhlanga Rocks Drive, Durban North, KwaZulu-Natal
Johannesburg
Ground Floor, West Wing, 6 Kikuyu Road, Sunninghill, 2191 |
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