Author: Dave Beattie
Much has been written about the Two-Pot application and payment process. Very little has been said about the employer’s role in this process and more importantly the situation where employees end up having to pay tax on assessment and blame the employer even though the employer has had nothing to do with it.
Are your employees unhappy because they have had to pay tax on assessment and blamed you as the employer for this? If so, the issue might be a two pot claim. Give HRTorQue a shout today to help you.
Why can a two pot claim lead to a problem on assessment?
A two-pot claim is a process between an employee and the retirement fund. It is not a transaction that an employer must report on as the employee is not receiving remuneration from the employer due to this claim. The remuneration is coming from the retirement fund, and the retirement fund has an obligation to report it in the required format. The retirement fund reviews the application form, does the tax directive application, withholds the tax specified by SARS and reports the transaction on an IRP 5.
So where does the tax difference and potential shortfall come from? During the two -pot claim process it is possible that the incorrect annual taxable income for the employee could be used (because the retirement fund may not have the full income information), meaning that SARS has deducted too little tax on the two-pot claim. The two-pot claim can also push the employee’s annual taxable income into a higher tax bracket, meaning that the sum of the tax deducted by the employer (on the remuneration earned) and the retirement fund (for the two-pot claim) is less than the tax owing on the total taxable income on assessment.
Why is this an employer issue?
Whilst the tax shortfall on assessment is not really an employer issue, the employee may still demand answers. Should the employer wish to assist the employee in a problem-solving exercise to get to the bottom of such an issue it is important that they do so in a logical manner.
We can assist employers who do not have the technical skills to work through this logic to quickly problem solve the issue. We have significant experience in the field of payroll administration and personal Income Tax and will be able to promptly provide feedback in a format that can be provided to the employees concerned. This will ensure that time is not wasted and that employee confidence is maintained. Please reach out if you need any assistance in this regard.