There are a few amendments to ETI effective 1 March 2022.
Firstly, the Minister of Finance announced an increase to the ETI values which may be claimed by qualifying employers, and a table with the ETI values was published soon thereafter. These values were amended again on 25 February, in order to correct values in the last bracket (R4 500 – R6 499,99), below is the ETI table effective 1 March 2022.
Secondly, the Taxation Laws Amendment Act 2021, amended the definition of an ‘employee’ and an additional provision was added to qualify for ETI, which means that ‘work’ must actually be performed in terms of an employment contract and the employee should not mainly be involved in the activity of studying (unless entered into a learnership agreement). The employee must also be documented in the employer’s records as envisaged in the record keeping provisions of the BCEA, for ETI to be claimed.
In addition to the above changes, the definition of ETI “monthly remuneration” was changed in the Taxation Laws Amendment Act, effective March 2022. The following provision was added:
“Provided that in determining the remuneration paid or payable, an amount other than a cash payment that is due and payable to the employee after having accounted for deductions in terms of section 34(1)(b) of the Basic Conditions of Employment Act, 1997 (Act No. 75 of 1997), must be disregarded’’.
Section 34(1)(b) of the BCEA refers to deductions “required or permitted in terms of a law, collective agreement, court order or arbitration award”.
Based on the wording of the legislation, our initial interpretation of “monthly remuneration” was:
remuneration as per the Fourth Schedule of the Income Tax Act,
minus fringe benefits,
minus deductions (required or permitted in terms of a law, collective agreement, court order or arbitration award).
However, this would not have achieved the desired result, as it would exclude salary sacrifices which National Treasury wanted to prevent. The intention of the change was to exclude non-cash payments (e.g. fringe benefits) and salary sacrifices (more specifically training costs in the form of a salary sacrifice). The PAGSA (Payroll Authors Group of SA) requested an interpretation from SARS and it was confirmed that deductions other than Section 34(1)(b) deductions, should reduce monthly remuneration, alternatively adding section 34(1)(b) deductions to net pay.
In other words, the ETI remuneration will no longer be remuneration as defined in the Fourth Schedule (taxable earnings plus taxable fringe benefits plus taxable employer contributions). From March 2022, “monthly remuneration” is:
remuneration as per the Fourth Schedule of the Income Tax Act,
minus fringe benefits,
minus deductions OTHER than those required or permitted in terms of a law, collective agreement, court order or arbitration award.
Take note:
- SARS will not be providing an interpretation ito S34(1)(b), rightly so, as this falls outside their scope of legislation to administer. Each employer will have to indicate which deductions do not fall within the scope of S34(1)(b) as this will differ for employers and it will have a direct impact on the ETI calculation.
- Sage will also not be providing a list indicating which deductions do not fall within the scope of S34(1)(b) as this will differ for employers.
** We are awaiting confirmation as to whether all shares and dividends, or only the non-cash payments related to shares, and dividends paid in speci (in kind), must be excluded from monthly remuneration.
Q: How will I select which deductions to include or exclude from ETI Remuneration?
A: Refer to page 11 to 13 of the Release Notes for Sage Business Cloud Payroll Professional 5.8a
Q: Who will be able to assist me to review and select the deductions to include or exclude from ETI Remuneration?
A: We recommend to contact your Sage Business Partner should you require assistance.
Q: Do I need to make the ETI Remuneration setup changes in March or can I do it in April?
A: All changes will need to done in March for the ETI remuneration and calculated ETI amount to be correct. If the changes are not done in March, the information will need to be imported with the ETI Take-on function, as there is no automated backdate calculations. Should you require assistance, please contact your Sage Business Partner consultant for assistance.