What it means to be a third-party agent for SARS
Few employers or employees truly understand what it means when you are nominated by The South African Revenue Service (SARS) as a third-party agent, which often results in a matter that could be resolved speedily lingering unnecessarily and impacting both parties. In this instance a Payroll professional is in a prime position to help manage the process. “Your company’s Payroll administrator performs many services that can alleviate a company’s administrative burden,” says Arlene Leggat, a director at the South African Payroll Association (SAPA). How it works If a taxpayer fails to submit their returns, or to pay their income tax, SARS will apply penalties every month until their returns are received and all amounts owed are settled. However, if a penalty is outstanding for over two months, the Tax Administration Act allows SARS to appoint any person, including an employer, to hold money for that taxpayer as SARS’ agent. If nominated as such an agent, that person/organisation will be sent an AA88 Notice showing an amount to be withheld from the employee’s income, which is to be paid to SARS by the due date shown on the form. It’s important to understand that when you, as an employer, receive an AA88 Notice, you become legally accountable for the payments. Penalties against an employee with unpaid tax will stop, but for outstanding returns penalties will be applied until the forms are submitted. Failure to adhere to the AA88 instruction will result in the agent being penalised for late payment. A separate penalty will be incurred for each month that the employee fails to submit their tax return. Every three months SARS will accumulate this debt and issue an AA88 to the Employer (Agent). SARS will also regularly send the agent an AA88 Reconciliation Statement showing any paid, cancelled or outstanding amounts for all employees against which an AA88 has been issued. What Payroll should do Any Payroll department should be familiar with the entire AA88 system, how to process payments and how to resolve issues of all kinds. If you’re unable to make deductions, as will be the case if the taxpayer has left your employment, Payroll should inform SARS of this situation immediately, via the @EasyFile system. On receipt of an AA88, Payroll should inform the employee that deductions will be made, ensure they understand their obligation, and assist them with settling their debt promptly. If the AA88 is for outstanding taxes, Payroll must ensure the employee knows why the deductions are being made to avoid that a sudden cut in pay might be perceived as trickery on the employer’s part and the worker becoming demotivated and unproductive. If the employee hasn’t submitted their return, Payroll should inform them that penalties will accrue until they’ve done so and explain the process to be followed. If possible Payroll may even offer assistance in completing and submitting such returns. They would require one of their Payroll team to be a registered Tax practitioner in order to do so. An employee who earns under R350 000 for the tax year isn’t required to submit a tax return. However, mistakes can creep in and penalties are applied in error. If Payroll receives an AA88 Notice that appears to be penalties for late submission (usually increments of R250), they must encourage the employee to take it up this with SARS to resolve as soon as possible If the deduction will cause the employee financial distress, Payroll should inform the employee that they can reduce the deductions by proving to SARS they cannot afford it. The employee must gather information about their expenses and submit this to SARS. If SARS deems the case valid, it may split the payments into more manageable monthly installments. Payroll should also keep the employee updated on deductions, especially in the case where unsubmitted returns yield new penalties every month. In this way, the employee can see the dynamics and that their employer is not withholding pay unfairly. In addition, if any refunds are due to the employee because of double payments, Payroll can inform them of the process to be followed apply for a refund. And if the employee leaves the company or dies, Payroll should apply for cancellation of further AA88s and refunds for any payments made afterwards. Education It would be greatly beneficial for any company to send Payroll personnel that are not acquainted with processing AA88s to SARS’ free workshops to ensure they have the latest information and requirements at their disposal. Value-added service “Make sure your Payroll department isn’t only processing AA88 claims endlessly, but providing a value-added service that keeps your workers happy, motivated and productive,” says Leggat. “They should always strive to help employees protect their income and reduce the administrative burden on your company.” ENDS MEDIA CONTACT: Idéle Prinsloo, 082 573 9219, [email protected], www.atthatpoint.co.za For more information on SAPA please visit: Website: http://www.saPayroll.co.za/ Twitter: @SAPayroll LinkedIn: The South African Payroll Association
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![]() The South African Payroll Association (SAPA) says that the proposed amendments to the Magistrates’ Court Act 32 of 1944, aimed at curbing unconstitutional practices relating to garnishee orders, are to be welcomed. The Association has urged Parliament to press ahead with tabling the bill now that the local government elections are complete. “The new bill is an excellent piece of legislation that corrects some of the glaring faults in the existing law, which have greatly prejudiced large numbers of vulnerable workers,” says Nicolette Nicholson, director at SAPA. “Because the current Magistrates Act sets no cap on garnishee orders, and the Basic Conditions of Employment Act cap personal deductions only, employees can find themselves with no pay to take home, clearly something that is not sustainable either for the individual or the company.” Proposed Amendments In terms of the proposed amendments, says Nicholson, a maximum of 25 percent of a person’s salary will be able to be garnished—it’s not clear yet whether of gross or nett salary. Under the new bill, garnishee orders will have to be filed in the court whose jurisdiction covers the area where the debtor resides. Whereas the present law allows garnishee orders to be issued by any magistrate’s court, making it easy for companies to approach courts anywhere in the country that are known to grant orders easily—or, indeed, where they may have a corrupt relationship with a specific court official. The new bill also tightens up on the issuing process to force magistrates to investigate thoroughly the debtor’s financial position in order to ensure orders are just and equitable. Furthermore, the new bill gives employers the responsibility of ensuring that salary deductions are made timeously (or risk becoming liable for any interest on arrears), and of stopping deductions when the amount stipulated in the judgement is paid in full. “These are all very good moves to protect employees,” says Nicholson. “However, one concern is the extra burden this places on payroll departments. My advice would be for companies with large workforces to engage the services of a reputable third-party service provider to manage the garnishee orders.” The proposed amendments have been approved by Cabinet and are now due to be considered by the Portfolio Committee on Justice and Correctional Services, although the date has not yet been set. In the meantime, says Nicholson, irrespective of the law, employees need to take responsibility for their own actions. Take responsibility However, the onus still falls on consumers to take responsibility for their spending. “Every citizen is responsible for conducting his or her financial affairs responsibly—that’s the bottom line,” says Nicholson. “If one lives above one’s means, then there will be consequences. In particular, employees must avoid relying on their variable income to fund their lifestyles—bonuses, overtime and the like are not part of the salary package and will vary in line with company performance. For example, many people find themselves receiving a garnishee order because they are relying on a bonus to pay for something, and then the bonus doesn’t materialise.” If employees run into trouble, she concludes, they should definitely turn to their employers for help. Although there is no legal obligation to provide financial or debt counselling, many companies do so, or would be prepared to refer an employee to someone who could help. In addition, most of the big retirement funds offer financial well-being services. “Help is definitely available—look for it,” she advises. “A problem with debt compounds quickly, so the earlier one begins with a solution, the better.” ENDS MEDIA CONTACT: Idéle Prinsloo, 082 573 9219, [email protected], www.atthatpoint.co.za For more information on SAPA please visit: Website: http://www.sapayroll.co.za/ Twitter: @SAPayroll LinkedIn: The South African Payroll Association |
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