2016 Retirement Reform

The 1st of March 2016 brought with it a number of significant changes that will affect employees with pension, provident and retirement annuity funds.  This legislation introduces a uniform tax treatment for all three of the above-mentioned funds (total taxable income deduction limited to 27.5% of income, with an annual cap of R350 000).

It also assigns retirement investments to two different categories: Defined Benefit (DB) schemes and Defined Contribution (DC) schemes. This distinction is important as it impacts the value of the fringe benefit arising from employer contributions:

  • Defined Contribution: the full value of the employer contribution
  • Defined Benefit: determined by means of a formula which uses a Category Factor

Employers should therefore contact their fund administrators in order to determine the nature of the fund. As a rule, all Retirement Annuity Funds will fall under the DC category with most Provident Funds doing the same. Pension funds could fall under either DC or DB. We would recommend that all employers with employees contributing to Pension or Provident Funds get in contact with the fund itself to ensure that the calculations are performed correctly. If it is a DB fund, and the fund has not issued a Contribution Certificate, employers should request this as a matter of urgency. This certificate contains pertinent information about the fund, including the Category Factor mentioned above. If applicable, the Category Factor should be entered into SimplePay when adding or updating a Pension or Provident fund item.

Our hard working code wizards have already made sure that SimplePay is fully up-to date with these new changes, and all you will need to do as a Payroll Administrator, is to input the appropriate category factor in the case of Defined Benefit funds.

As always, feel free to get in touch with our super helpful support team if you have any questions or concerns.

2016 Payroll Changes – Additional Medical Tax Credit

With the start of the new financial year looming ahead of us, lawmakers have been hard at work drafting legislative changes that will require Payroll administrators to keep their wits about them if they want to keep up.

To make your life easier, we make it our business to keep abreast of any and all changes that could effect how you process your payroll. In the coming weeks, we will be posting some of the most interesting changes that you should be taking note of, so be sure to check back regularly.

One of the most significant changes taking place in the upcoming financial year, is the introduction of the Additional Medical Tax Credit (AMTC).

This credit serves to give tax relief to employees who are over the age of 65, in the form of an increased Medical Tax Credit for each month.

As of 1st March 2016, employees aged 65 and up will be eligible to receive an additional reduction to the monthly amount of PAYE withheld to the value of 33.3% of the excess total contribution paid to the medical scheme that exceeds three times the regular Medical Tax Credit value. This Additional Medical Tax Credit will be reported separately from the Medical Tax Credit on the tax certificate.

For example:

An employee makes a monthly contribution of R1500 to his medical aid and has no dependents. The Medical Tax Credit in this case would be R270.

To calculate the Additional Medical Tax Credit, we first need to determine difference between 3 x R270 and the contribution. In this case the calculation would be as follows:

R270 x 3 = R810

R1500 – R810 = R690

R690 x 33.3% = R229.77 Additional Medical Tax Credit

This employee would then receive a total tax credit tax credit to the value of:

R270 (Medical Tax Credit)
+ R229.77 (Additional Tax Credit)
= R499.77 (Total Medical Tax Credit)

You’ll be glad to know, that our development team has been hard at work in order to ensure that this feature will be ready to go from the first of of March, with absolutely no additional input required from your side.

As always, if you have any comments or concerns, feel free to get hold of us in the comments or through our super helpful support team 🙂

POPI – We’ve Got You Covered

With rumours circulating of an effective date towards the end of the year, there’s been a lot of fuss lately around the Protection of Personal Information Act, otherwise known as POPI.

The basic idea behind POPI is the regulation of the processing of personal information. Personal information, broadly speaking, refers to any information regarding an identifiable natural or legal person, for example contact details, demographic information and private correspondence. Processing simply means anything done with personal information, including, but not limited to collection, storage, dissemination or destruction.

So what does this mean for you in terms of your payroll data?

As an employer, you will need to ensure that your employees’ personal information is processed in a manner consistent with the spirit and purport of POPI, meaning that it must be

  • processed with the employee’s knowledge and permission;
  • linked to a reasonable purpose – such as complying with tax and labour laws; and
  • carefully managed

At SimplePay, this was the case long before POPI, as the security of your sensitive payroll data has always been one of our greatest priorities. That’s why we have taken all of the steps reasonably possible to ensure that your and your employee’s data is securely stored and only accessed when necessary by those with the required permission to do so. This is done by means of SSL encryption, regular backups to two separate off-site locations and off-site data storage in an access controlled data centre.

For more detail on how we keep your data safe and your business POPI compliant, check out our Privacy Policy and Security Statement.

UIF Limit Increased

From 1 Oct. 20012, the annual limit for income subject to UIF contributions has increased from R149,736 to R178,464. That results in a new monthly limit of R14,872 and a weekly limit of R3,432.

Employees who have always earned less than the old limit (monthly R12,478), will not see any difference, they will still have the 1% deduction + 1% company contribution. However, those earnings more than the limit will see theirs increase from R124.78 per month to as much as R148.72 per month.

Tax tables and other info loaded for the 2011/2012 tax year

We’re pleased to announce that our clients and their employees can now see how their payroll will change in the new tax year. Payslips that fall in the 2012 / 2013 tax year will automatically meet the new legal requirements, while your payslips for the current tax year will still be calculated according to the current tax year’s rules, as you’d expect.

Here are the changes:

  • The biggest change: Medical Aid Tax Credits implemented. This replaces the old medical aid taxable income deductions.
    • R 230 per person for the employee and the first dependent.
    • R 154 per person for each additional dependent.
  • Tax free portion of subsistence allowance was increased:
    • R 303 per day for meals and incidental costs (was R 286).
    • R 93 per day for incidental costs only (was R 88).
  • New tax tables, with the usual slight tax relief.