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Important information in preparation of Release 5.4c (to be released towards end of May 2020)

The South African Ministry of Finance published the revised draft Disaster Management Tax Relief Bill and draft Disaster Management Tax Administration Relief Bill on 1 May 2020.

Additional relief and changes to existing measure and calculations were communicated, which will be included in the next software update Release 5.4c, towards the end of May 2020.

The update will include:

  • ETI calculation and table changes
  • SDL payment holiday

Please refer to the information below for important details about some of the expected changes.

ETI changes:

The following changes are only applicable to employers who were registered on or before 1 March 2020:

Minimum Wage Test

Change - The R2000 wage for a full month (i.e. at least 160 employed and remunerated hours) will not apply. 

Effective date: 1 April 2020 – 31 July 2020

Minimum wage test before April 2020 and after July 2020 Minimum wage test from 1 April 2020 to 31 July 2020
  • The higher of-
  • The minimum rate per hour as specified by the wage regulating measure, or
  • The minimum rate per hour as specified in the National Minimum Wage Act.
  • If none of the above is applicable (i.e. no bargaining council or the employer is exempt from the National Minimum Wage Act) then the R2000 rule must be applied.
  • The higher of-
  • The minimum rate per hour as specified by the wage regulating measure, or
  • The minimum rate per hour as specified in the National Minimum Wage Act.

 

What should be done on the payroll?

  • All employees must be linked to a Minimum Wage Code
  • All employees must be flagged/ticked for Wage Regulating Measure / National Minimum Wage tick on the employee ETI tab.
  • See example below:

     

  • If the employees are not linked to a Minimum Wage Code and Wage regulating measure/National minimum wage tick is not flagged, no ETI will calculate for the period 1 April – 31 July 2020

Guides to assist you:

We recommend to review and make the changes as soon as possible. Once the Release 5.4c software is installed, all calculation will be done according to the linking.

Employee Donations to the ‘Solidarity Fund’

According to the Fourth Schedule to the ITA, a bona fide donation made by the employer on behalf of the employee for which the employer will be issued a receipt as contemplated in section 18A(2)(a) will be allowed as a tax deduction, limited to 5% of balance of remuneration before taking into account the tax deduction of donations.

To alleviate the cashflow difficulties of employees where their employers contribute to the Solidarity Fund on their behalf (for which they will be issued an receipt as contemplated in section 18A(2)(a) of the ITA), Government is proposing a special relief measure by temporarily increasing the current 5% tax limit.

An additional limit will be available (depending on the employee’s circumstances), namely –

  • A maximum limit of 33.3% of that remuneration per month for three months from 1 April to 31 July, or  
  • A maximum limit of 16.66% of that remuneration per month for six months from 1 April to 31 September

“Solidarity Fund” means the Solidarity Response Fund, registered with the Companies and Intellectual Property Commission as a non-profit company under registration number 2020/179561/08;

This is only applicable to contributions to the Solidarity Fund – this will be reported against the new IRP5 code 4055.

Any other donation is still limited to 5% - this will be reported against IRP5 code 4030 (it must be clarified in the BRS whether a donation to the Solidarity Fund for which a portion of this 5% tax deduction was claimed, must also be reflected against code 4030).

What should be done on the payroll?

  • New IRP5 codes will be implemented in the September 2020 release, and will not be included with Release 5.4c
  • For the interim, create a deduction line, as in the example below, using IRP5 code 4030. Click here for a guide how to create a deduction line.

  • Take note that the full value entered on this deduction line, will be tax deductible and it is therefore the payroll administrator/manager's responsibility to ensure that the deduction value is within the limits.
  • If the employee wants to contribute more to the fund, than what is allowed as tax deductible, create a separate deduction line, for the Not Tax deductible portion.

TERS Payouts

This TERS benefit to be paid to employees is excluded from income tax i.t.o section 10 of the ITA, therefore, not subject to PAYE, UIF, SDL etc.

As communicated in the ‘Covid-19 Relief Measures Affecting Payroll’ document, if the TERS benefit is paid to the employer it must be processed through the payroll.

The TERS benefit payable to the employee must be reported against IRP5 code 3724.

What should be done on the payroll?

  • New IRP5 codes will be implemented in the September 2020 release and will not be included with Release 5.4c.
  • For the interim, create an earning line, as in the example below, using IRP5 code 3602.
  • The IRP5 code can then be changed before the midyear IRP5 submissions

 

SDL Payment Holiday

Employers who are registered for SDL will be exempt from the SDL liability and payment of the SDL contribution.

Effective date: 1 May 2020 – 31 August 2020

According to the SARS FAQ, the SDL liability amount will automatically default to 0.00 on the EMP201 return for the 4-month period.

What should be done on the payroll?

  • More information and step to apply the change as from May 2020 will be communicated in the Release notes of 5.4c.