In May we reported on the fact that most payroll systems had mis-calculated the Employment Tax Incentive (ETI) because the disaster management legislation retrospectively changed rules making it exceptionally difficult.
We have been surprised to see relatively little communication about this from payroll software providers. We suspect then that most employers would have miscalculated their ETI for the six months ended 31 August 2020.
So, why is this important:
- We have no idea what validation checks SARS will use for this recon period (in the past few days the validation checks have not allowed the disaster management ETI changes, but we assume this will be rectified). Without understanding your ETI calculations you will struggle to submit your EMP501 for this recon period;
- Assuming SARS applies the validations correctly, if you haven’t manually adjusted your calculations for April and May in particular, then they will be wrong and your entire ETI claim will be rejected – leading to penalties and interest;
- If you assumed your system would calculate ETI correctly during the disaster management period, you may have left lots of money on the table as unclaimed;
- SARS is short of cash. There is a high likelihood of subsequent audits in this space given the complexity. Don’t be caught out having to pay penalties and interest post an audit because you assumed your system would do things correctly
We encourage all employers to do a manual calculation of their ETI to get comfortable with their claims and to support their EMP501 filing. Don’t be caught out.