 It’s personal tax season again and millions of South Africans are busy filling out their tax returns. To avoid any delays in this widescale process, payroll departments across the nation must work quickly and in strict compliance with the law. Failure to do so could result in heavy penalties for their organisations. Arlene Leggat, a director at the South African Payroll Association (SAPA), says that, to satisfy all statutory obligations, not just tax regulations, payroll practitioners need to be suitably qualified. “Payroll plays a leading role in any organisation’s governance and compliance efforts. To reduce risk, employers must ensure their administrators are competent.” But how can they guarantee that this is the case? Practitioners and good governance Payroll practitioners should be driven by good governance practices and must stay abreast of current legal requirements. For example, the recent Protection of Personal Information (POPI) Act places an additional burden on businesses to carefully manage and protect any personal information they store or process about their workers. Practitioners must be aware of such developments and understand how to remain compliant with them in the course of their duties. According to Leggat, as compliance requirements increase, more companies are realising the importance of a professional designation. “SAPA is the recognised regulatory body for payroll practitioners in South Africa,” she says. “When companies hire outsiders, there’s no guarantee they’ll get someone who is competent in their field, and the risk of falling short in their legal obligations is growing year by year.” To be awarded one of SAPA’s professional designations, applicants must have the relevant qualifications and experience needed to perform their duties at junior, mid or senior levels. But even after becoming a member, they’re required to continually improve their payroll skills and knowledge. CPDs A core component of ensuring SAPA members understand good governance practices and compliance with legislation is the association’s continuous professional development (CPD) programme. Members must accumulate a set number of CPD points every 2 years to retain their SAPA title. This can be achieved by attending SAPA-approved courses, each carrying a predetermined number of points. Code of ethics In addition, members are bound to a code of ethics and any breach could result in their membership being revoked. This gives employers the assurance that their payroll officer strives to conduct themselves in a manner befitting their legal and moral responsibilities. In addition, organisations have in SAPA a channel through which to voice any grievances. Hiring for compliance Leggat advises companies to avoid the dangers of non-compliance and promote good governance by hiring SAPA approved payroll practitioners. “We sometimes read of incidents of payroll fraud or noncompliance, and this is usually the result of employing unregulated administrators. For members of a professional body, there are too many controls in place, so poor conduct puts their careers at risk. Therefore, our designations alone promise a high level of compliance and governance.” Employers and unregistered practitioners are invited to enquire about the benefits of SAPA membership. SAPA will be hosting its annual conference this year titled Portraits of Success as follows:
To register visit http://www.sapayroll.co.za/Events/Conference.aspx 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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 Author: Cathie Webb, Director, South African Payroll Association
We encourage all employers, employees and payroll departments to prepare themselves for an income tax increase that will likely be announced during Finance Minister Pravin Gordhan's upcoming National Budget Speech. Too much tax South Africans already contribute multiple taxes. Therefore, the government is faced with a difficult decision - how to bring in much-needed revenues to run the country effectively without overburdening the man or woman in the street. In tax theory, there’s a level at which taxation can become so high that the average person stops aspiring to a better lifestyle and becomes less economically active. At this point, working any harder seems fruitless. In light of this, the government strives to meet its budgetary requirements without crossing that threshold. However, if people are still left with less disposable income, this can lead to a lower aggregate demand for goods, which puts deflationary pressure on the economy. The result is loss of business profits, lower output and therefore fewer jobs. Limited options However, government’s options are limited. In his 2016 budget speech, Minister Gordhan clearly indicated that R28 billion would have to be raised over the next two years, consisting of R13 billion in 2017 and R15 billion in 2018. There are only three main paths to acquiring the funds, namely by increasing value-added tax (VAT), company tax and/or personal income tax. Because a VAT increase would place a uniform burden on all members of the population, the greatest impact would be felt by the poor. Therefore, it’s less desirable to increase VAT, as opposed to company or personal tax. Despite this, it should be noted that South Africans enjoy the lowest VAT rate in the world, so an increase would not be unwarranted and some even expect it. However, taking into account all taxes levied on South Africans, it’s quite possible the country has one of the highest taxations globally with fewer benefits than nations paying more VAT. It would appear then that an increase in personal and company tax is highly likely, with a lower probability of an increase in VAT. Commentators point to several other taxes the government may levy, including proposed increases on consumption goods, such as alcohol, tobacco, soft drinks, fuel, as well as the much publicised sugar tax. However, these will not be enough to cover the deficit. Bracket creep Certain income ranges may also be exposed to bracket creep. This happens when workers receive their annual pay increase to offset inflation. They haven’t gained extra purchasing power but, from a tax perspective, they appear to be earning more and in some cases, may enter a higher tax bracket. The effect could be that the higher taxation reduces their take-home pay below previous earnings. Historically, tax brackets have been adjusted to match inflation-based pay increases. In the years ending February 2016 and February 2017, the top 2 tax tiers remained essentially unchanged. But the marginal rate in these brackets increased from 40% to 41%. This year, government might leave selected tax brackets as is, or raise them at a lower rate than inflation-adjusted increases. If this happens, it will have an added effect to higher income tax and employees should be prepared to adapt their lifestyles accordingly. Payroll preparation If an income tax increase proves true, payroll departments should move as swiftly as possible to update their tax tables, and to ensure that the staff in the organisation are aware of the changes, and how it will impact them. It’s not unusual for larger organisations to take longer because of their complexity and size. But delaying implementation until April or May could mean that employees will pay more tax due to accumulated PAYE from March. Seeing a lower take-home figure on one’s payslip is never appreciated. Looking to the future Although South Africans have no reason to celebrate, it’s important to realise that our current economy is more the result of the global financial crisis than our own doing. We’re a great nation with the highest gross per capita income (GDP) in Africa and we have a lot going for us. We can regain our momentum by rolling up our sleeves, pulling together and working hard together to improve our nation. 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 Associatio 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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