Amendment Acts: Changes that Affect Payrolls
The 2022 Budget proposals were followed by the issue of draft Amendment Bills and the further steps of the legislation amendment cycle during 2022, culminating in the issue on 5 January 2023 of the following Amendment Acts:
1.Taxation Laws Amendment Act [TLAA]
This Act deals with the substantive changes to the Income Tax Act proposed in the 2022 budget. 2.Tax Administration Laws Amendment Act [TALAA]
This Act deals with the administration-related changes proposed in the 2022 budget to the various Acts that fall under SARS. 3.Rates and Monetary Amounts and Amendment of Revenue Laws Act [Rates Act]
This Act confirms the tax tables, rebates and threshold changes proposed in the 2022 Budget. 4.Draft Revenue Laws Amendment Bill [Revenue Bill]
This Bill introduced the ‘Two-pot’ retirement system reforms. Changes that Affect Payrolls
There were very few changes to the legislation that have an impact on payrolls, the least that I can remember in decades, and with one exception of an earlier date for the ETI Understatement Penalty, they are all effective from 1 March 2023. There are several changes that affect retirement funds and the members of these funds, but except for one, these changes are outside of payroll administration and are not discussed here. The following amendments do have an impact on employers and payroll suppliers. ETI Understatement Penalty
Budget 2022 Proposal
In view of the abuse of the Employment Tax Incentive (ETI) that has been encountered it is proposed that the Employment Tax Incentive Act be amended in order to facilitate the imposition of understatement penalties on ETI reimbursements improperly claimed. This is achieved by classifying ETI reimbursements as refunds for purposes of the Tax Administration Act and specifically as refunds of tax for purposes of the understatement penalty provisions. The Changes to the Legislation
Section 221 of the Tax Administration Act is hereby amended by the substitution for the definition of ‘tax’ of the following definition:
“‘tax’ means a tax as defined in section 1, excluding a penalty and interest, and will for purposes of this Part include an employment tax incentive as contemplated in section 2(1) of the Employment Tax Incentive Act, 2013 (Act No. 26 of 2013);”. Effective date:
This proposed amendment will come into operation on 1 September 2022. Note that in the draft amendment Bill issued in July 2022 this change was proposed to come into effect on 1 September 2022, long before the amendment was promulgated on 5 January 2023. The reason behind making the effective date retrospectively effective was no doubt to align the penalty on ETI reimbursements that are incorrectly claimed with the start of the second 6-monthly tax certificate submission cycle of September to February. From memory, draft legislation can be implemented prior to promulgation as long as it is a matter of urgency, the amendment is clear, understandable, and properly communicated and explained. Also from memory, this same situation arose in April 2020 with the Covid-19 draft Disaster Management Tax Relief Bill that introduced retrospective changes back to 1 April 2020 for the enhanced ETI requirements that were introduced under huge pressure and as a matter of extreme urgency. Following comments from concerned parties, SARS agreed to clarify how the penalty will be determined to explain the interaction between section 4(2) of the ETI Act and the USP (understatement penalty) to ensure that there is not a duplication of penalties. Section 7B Variable Remuneration
This is a relatively minor change to section 7B, but section 7B is starting to make its presence felt in other areas of payroll administration, so you would be well-advised to become familiar with its requirements. To assist you, this Newsflash goes into detail to explain the concept of ‘variable remuneration’, the changes introduced by the amending legislation, as well as aspects of the application of ‘variable and ‘non-variable remuneration’ both now and in the future.