Look out for 3 key tax areas

BUDGET SPEECH: TAX HIKES ARE EXPECTED

Here are three other things I’m looking out for in this year’s budget; each will have a major effect on employees and employers:

1. National Health Insurance (NHI)

A big will-he-or-won’t-he question is whether the tax credit taxpayers receive for their medical aid payments will be done away with. Government’s eyeing an estimated R25 billion in funds from scrapping these tax credits, to be used to fund the incoming NHI scheme. The move is likely to be contentious since the medical aid credit makes decent healthcare affordable to millions of people who might not otherwise be able to afford it. Taking it away could have dire consequences for the health of millions of lower-income South Africans and put even more strain on an already-pressurised public healthcare system.

2. Travel reimbursements and allowances

Up to February 28, a portion of an employee’s travel costs was treated as remuneration when: The per-kilometre rate used to calculate the reimbursement was greater than the Sars-prescribed rate per kilometre. An employee was reimbursed for over 12 000 business kilometres during the tax year. The reimbursement value was greater than the prescribed maximum number of business kilometres (2018: 12 000 km) multiplied by the prescribed rate per kilometre (2018: R3.55).

As a result skills development levies and UIF contributions were added to something that should be considered an operational cost rather than a payroll cost. This increased the employer’s cost of employment. These levies and contributions weren’t assessed at the end of the tax year, so employers couldn’t claim a refund.

We’ve long argued this regulation should be changed to be fairer to employers and employees. Sars has announced a simplification of the travel allowance and the travel reimbursement provisions, with effect from March 1.

Under this change, only the portion of the value of the travel expenses reimbursed at a rate above the ‘prescribed’ rate per kilometre will be treated as remuneration. However, in future, we’d like to see Sars handle travel reimbursements in the same way as it treats subsistence allowances for employees when they travel.

3. Employment Tax Incentive

I’m a fan of the Employment Tax Incentive (ETI) as an innovation towards addressing SA’s youth unemployment crisis. However, its administration has always been complex – which has made some companies hesitate to take advantage of it.

Though Sars and Treasury have tweaked it, I’d welcome further simplification of the definitions and calculations. That said, I don’t expect much news about the ETI this year, apart from alignment with the National Minimum Wage expected to be introduced from May 1.

Rob Cooper is at Sage, and chair of the Payroll Authors Group of South Africa