For over 30 years, the PAGSA is uniquely positioned to provide informed and up to date information on employment tax related legislation, administration requirements, practices, tax certificate requirements, electronic returns.

From humble beginnings to representing the payroll industry in all discussions with relevant statutory bodies.

1989 – Established in 1989 with SARS encouragement and support.
The Payroll Authors Group of South Africa was established in 1989 with the active support of SARS and is an ‘Association of Persons’ registered in terms of section 30B of the Income Tax Act, with a constitution approved by SARS.

2012 – The PAGSA became independent
Prior to 2012, the PAGSA was part of the South African Revenue Service (SARS). In 2012, however, PAGSA became an independent body in order to better serve the needs of its members. The organization is made up of payroll professionals who share a commitment to accuracy and compliance. In addition to providing guidance on compliance issues, PAGSA also offers educational resources and networking opportunities for its members. As the payroll landscape in South Africa continues to evolve, PAGSA will continue to play an important role in ensuring that its members are able to meet the challenges of this ever-changing field.

2016 – Launched Associate Membership
In 2016, the PAGSA launched an Associate Membership to further its reach. This membership type is for tax practitioners that are not payroll suppliers but are either users of payroll systems or providers of payroll supporting services.

2019 – Reached 100+ Members
The PAGSA, payroll authors group of south africa has steadily grown over the years with a very niche target market. The group provides workshops, webinars and other training opportunities for its members who design and maintain payroll systems. In 2016, the PAGSA reached 100 members. The group’s success is due to its focus on providing quality resources and support to its members. The PAGSA is an excellent example of a niche organisation that has found success by catering to the specific needs of its members.

2020 – Launched Email Query Service
The PAGSA, payroll authors group of south africa, launched its Email Query Service in 2020 in order to better support its members. The service provides a platform for members to ask payroll-related questions and receive prompt responses from experts. The launch of the service demonstrates the PAGSA’s dedication to supporting its members and ensuring that they are up-to-date on the latest payroll information. In addition to the Email Query Service, the PAGSA offers a variety of resources on its website, including a searchable database of payroll articles and a forum where members can share experiences and advice. With its wealth of resources, the PAGSA is an essential source of information for anyone involved in payroll in South Africa.

The Payroll Authors Group of South Africa (PAGSA) was established in 1989 with the active support of SARS who coined the term “Payroll Author” for companies that develop, implement and support computerised payroll systems.

The PAGSA focuses on employment-related legislation, and engages with the statutory bodies whose legislation and operational requirements impact on employers and payroll systems.

Over the years, the PAGSA has been actively involved in SITE, the RDP levy, the design and implementation of the computerised tax certificate system, the implementation of the Skills Development levy, the new UIF legislation, and the design of ‘e@syFile for Employers’ to name only a few.

A vitally important part of the PAGSA’s activities is to provide input to help shape future requirements and to make the authorities aware of the perspective and problems that employers and payrolls face. These discussions have resolved many problems at an early stage, and have made it possible for payroll systems to comply with what might otherwise have been impractical requirements.

PAGSA member companies provide payroll systems, services and support to virtually all companies in South Africa who are computerised, and their payroll systems calculate and administer the withholding of employment taxes for thousands of companies, and in turn for literally millions of employees.

The PAGSA is today acknowledged as an essential partner by all statutory bodies with whom employers need to comply and pay various taxes, levies and contributions to as required by law.

2023 BUDGET REVIEW DATE

The Budget Review is normally presented on the last Wednesday of February every year.

However, in a year when the Budget Review date is very close to 1st March, there is very little time in which payroll suppliers can implement those requirements of the budget that are legally effective from 1st March.

When this situation has arisen in the past, we have requested that an exception be made to present the Budget on the second last Wednesday of February, and the PAGSA’s request has been acceded to.

The latest PARLIAMENTARY PROGRAMME FRAMEWORK FOR 2023 has been issued and confirms that the 2023 Budget Review will be presented on Wednesday 22 February 2023.

UIF E03 SPECIFICATION REVISION PROJECT

Background
Employers, payroll suppliers, and the Unemployment Isurance Fund experienced many problems during the TERS period of 2020 and 2021, followed rapidly by more problems resulting from the surprise introduction of the Electronic Compliance Certificate system in January 2021 that was then temporarily withdrawn in April 2022.

Despite many emails and attempts to discuss these problems during this period, communication with the Fund was not satisfactory.

Towards the end of 2022, the Unemployment Insurance Fund and the PAGSA agreed to re-establish regular meetings, and in a meeting held on 1 December 2022 this process was formalised.

It was agreed that the regular meetings between the Fund and the PAGSA that we experienced over the past 25 years would be re-established and the Fund and the PAGSA have already had two meetings in January 2023.

Revision of the UIF E03 Specification

The purpose of these meetings is to revise the UIF E03 specification document so that payrolls can provide the Unemploymnet Insurance Fund (UIF) with the additional employee data that the Fund needsto be able to record employee remuneration accurately under certain circumstances, and to issue E-Compliance Certificates correctly in certain scenarios.

The Road Ahead

Two PAGSA task teams have been set up to research some problematic aspects of remuneration declaration through UIF, as well as investigating possible technical changes to Ufiling.

COMPENSATION FUND: EARNINGS THRESHOLD AND ROE SUBMISSION PERIOD

The Director-General of Employment and Labour issued Government Gazette Number 48065 on 17 February 2023 to announce that the period during which employers must submit the annual Return of Earnings for Actual earnings for 2022/2023, and Provisional earnings for 2023/2024, is 1 April 2023 to 31 May 2023.

As a result of a request submitted earlier to the Fund, a second Gazette with the same number (48065) and the same date of issue (17 February 2023) specified the two earnings thresholds as follow:
1. R 529 264 for 1 March 2022 to 28 February 2023
2. R 563 520 for 1 March 2023 to 28 February 2024.

BASIC CONDITIONS OF EMPLOYMENT ACT: EARNINGS THRESHOLD INCREASE for March 2023

The Minister of Employment and Labour issued Government Gazette Number 48092 on 20 February 2023 to increase the BCEA Earnings threshold from R224 080,48 pa to R241 110,59 pa with effect from 1 March 2023.

Note that the concept of ‘BCEA earnings’ is unchanged. Its ‘definition’ is included in the notice and is only used for the application of this threshold.

In simple terms, ‘BCEA earnings’ for the purpose of this earnings threshold is remuneration as defined by the BCEA, but excluding achievement awards (commission, bonuses, etc.) and overtime.

2022 Budget proposals – 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.

2022 Budget proposals – CHANGES THAT AFFECT PAYROLLS

There were very few changes to the legislation that have an impact on payrolls, 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.

ETI Understatement Penalty – Budget 2022 Proposal – 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);”.

ETI Understatement Penalty – Budget 2022 Proposal – 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.

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.

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.

Background to Section 7B

The general taxation rule is that income, including remuneration as defined by the Fourth Schedule of the Income Tax Act, must be taxed on the earlier of the date of accrual (when there is an unconditional entitlement to the money), and the date of payment.

For many years before 2013, the PAGSA drew the attention of the tax authorities to the administration difficulties experienced by payroll suppliers and employers when certain types of remuneration accrue in the last month (or months) before the end of a tax year but can only be paid in the first month (or months) after the start of the new tax year when the amounts are available and/or can be quantified.

Before the concept of variable remuneration was introduced, the payroll for the last month of the tax year must be re-opened, the remuneration adjustments made, the payroll rerun, employees paid the additional net pay amount, the EMP201 in respect of that last month must be adjusted and paid with penalties, and the tax certificates in respect of the previous tax year must be adjusted.

From this can be seen that retrospective adjustments place a significant administration burden on payrolls, payroll offices, and in some cases also on SARS (adjustments to EMP201’s, tax certificates, and EMP501 reconciliations).

After many requests from the PAGSA, section 7B of the Income Tax Act was added and introduced the concept of ‘variable remuneration’ from 1 March 2013 as the solution. Variable remuneration is deemed to accrue when it is paid to the employee, and it is therefore taxed when it is paid.

In other words, all remuneration types that are ‘variable remuneration’ are taxed and administered in the month in which they are paid, not the month in which they would normally have accrued.

Which Remuneration Types are Variable Remuneration?

Section 7B divides the various types of Fourth Schedule remuneration into two groups:

1. Variable Remuneration: Section 7B specifies nine ‘variable’ remuneration types (listed in the Appendix) including commonly occurring remuneration types such as overtime, bonuses, commission, travel allowances and travel reimbursements, as
well as night shift and standby allowances, and BCEA leave that is paid out on termination. [Recently added to variable remuneration from 1 March 2023 is an amount “that is determined based on the employee’s work performance” .] Variable remuneration is deemed to accrue on the date of payment and must be taxed when paid.

2. Non-variable Remuneration: All remuneration types that are not variable remuneration, are referred to as non-variable remuneration, of which the most obvious examples are salaries and wages. Non-variable remuneration must be taxed at the earlier of the date of accrual, or the date of payment.

Section 7B Variable Remuneration – Budget 2022 Proposal

The 2022 Budget proposal explains the reason for the change.

Section 7B of the Income Tax Act (1962) allows for the taxation of variable remuneration to be deferred to the date when the amount is paid to the employee rather than when it accrues to the employee.

The act provides that any amount of variable remuneration paid by the employer to the employee is deemed to accrue to the employee on the date during the tax year in which the amount is paid.

Under the Income Tax Act, variable remuneration includes:
1. overtime pay, bonuses or commission;
2. an allowance or advance paid for transport expenses;
3. an amount the employee becomes entitled to as a result of unused leave;
4. any night shift or standby allowance; or
5. any amount paid or granted for a reimbursement as contemplated in the Act.

While the inclusion of commission caters for performance‐based payments that form part of the employee’s salary in the formal sector, it does not cater for the informal sector, where such payments may be calculated based on units produced (because the word “commission” means a percentage‐based payment and is not determined based on units produced).

Government proposes that changes be made to section 7B to cater for these performance‐based variable payments. Further to the above, the current provisions of section 7B of the Act need to be clarified to cater for instances where any type of variable remuneration accrues to the employee and the employee dies before the date of payment of the variable remuneration.

Section 7B Variable Remuneration – Standing Committee on Finance (SCOF)
In September 2022, the SCOF removed all reference to the informal sector (remuneration based on units produced can paid in both the formal and the informal sector) from the draft amendment, and explained the necessity of introducing payments that are calculated based on units produced as follows: Although “commission” is included in the current list of variable remuneration, such commission only caters for performance-based payments that form part of the employee’s salary, it does not cater for instances where such payments are for example calculated based on units produced.

This is due to the fact that the common meaning of “commission” refers to a percentage-based payment as opposed to an amount determined based on units produced.

The proposed amendment is essentially intended to cater for instances where a performance-based payment, over and above the employee’s wages, is dependent on the fulfilment of a suspensive condition by the employee.

An example would be of a salaried employee who packs boxes, and is paid an incentive based on the number of boxes packed that exceed 1,000 boxes, checked in the month following the month in which the boxes were packed.

Final Change to Section 7B – Budget 2022 Proposal

The final Taxation Laws Amendment Act of 5 January 2023 states as follows: “Section 7B of the Income Tax Act, 1962, is hereby amended— (b) by the addition in subsection (1) in the definition of ‘‘variable remuneration’’ of the following paragraph: ‘‘(g) any amount of ‘remuneration’ as defined in paragraph 1 of the Fourth Schedule (other than a bonus) that is determined based on the employee’s work performance.’’; and (c) by the addition in subsection (2) of the following proviso: ‘‘: Provided that where the employee is deceased before the date of payment, the amount is deemed to accrue to the employee and constitutes expenditure incurred by the employer, on the day during the year of assessment prior to the date of the employee’s death.’’.”

Final Change to Section 7B – Budget 2022 Proposal – Effective date:

The proposed amendments will come into operation on 1 March 2023 and apply in respect of amounts accrued or expenditure incurred on or after that date, or deaths occurring on or after that date.

Unemployment Insurance Contributions Act – Budget 2022 Proposal

Section 7B of the Income Tax Act is linked to the Unemployment Insurance Contributions Act by the definition of remuneration in the Fourth Schedule. Remuneration paid in a month (or months) after must be applied differently depending on whether the remuneration paid is ‘variable remuneration’ or ‘non-variable remuneration’.

SARS has provided the PAGSA with an opinion on how to apply section 7B to UIF contribution requirements under circumstances where the employee is paid remuneration in a month (or months) after an employee’s services have been terminated. The application is different depending on whether the remuneration paid is ‘variable remuneration’ or ‘non-variable remuneration’.

The initial SARS opinion has raised more questions that are in the process of being clarified. As soon as these opinions are finalised, a Newsflash will be issued.

SARS Modernisation of Personal Income Tax Act (PIT) – Budget 2022 Proposal

While section 7B was introduced to simplify payroll and tax certificate administration for employers over the period spanning the end of one tax year and the start of the next tax year, section 7B applies equally to any period during a
single tax year.

This might influence the ‘SARS Modernisation of PIT’ project (see PAGSA NF 2023-03 for an update.

Retirement of a Provident Fund Member on Grounds other than Ill-health
Background

Major retirement reforms were implemented with effect from 1 March 2016 to standardise tax treatment and administration across the three types of retirement funds.

To improve preservation of retirement benefits after retirement or early withdrawal, and to align the pay-out rules of provident funds with those of pension funds and retirement annuity funds, the retirement reforms that require mandatory annuitisation for provident fund members came into effect from 1 March 2021.

As from 1 March 2021, it is no longer necessary to differentiate between a pension, retirement annuity, and provident fund for retirement purposes as these funds now operate in the same way.

However, paragraph 4(3) of the Second Schedule to the Act retains a level of distinction as it stipulates that in the event that a member of a provident fund retires before he reaches the age of 55 years and such retirement is for reasons
other than ill-health, any lump sum benefits received by or accrued to said member shall be taxed as a withdrawal benefit as opposed to as a retirement benefit.

Since the provisions of paragraph 4(3) do not apply to types of retirement funds other than provident funds, an anomaly exists as paragraph 4(3) of the Second Schedule to the Act results in differentiated tax treatment for provident fund members and members of other types of retirement funds.

Retirement of a Provident Fund Member on Grounds other than Ill-health – Budget 2022 Proposal

To address this anomaly and ensure uniform treatment across all types of retirement funds, Government proposed that paragraph 4(3) of the Second Schedule to the Act be repealed.

Retirement of a Provident Fund Member on Grounds other than Ill-health – Budget 2022 Proposal – Legislation Change

Paragraph 4(3) of the Second Schedule is hereby amended by the deletion of subparagraph (3).

Retirement of a Provident Fund Member on Grounds other than Ill-health – Budget 2022 Proposal – Effective date
The amendment will come into operation on 1 March 2023 and apply in respect of years of assessment commencing on or after that date.

SARS PAYE BRS VERSION 22-0-0 FOR 2023/24

The SARS PAYE BRS version 22-0-0 that specifies the technical requirements that payrolls must comply with when issuing tax certificates was issued by SARS on 24 February 2024 and is available on the SARS website.

SARS PAYE BRS Version 22-0-0 includes:
1. The changes necessary for the 2022/23 Tax year end tax certificate submissions in April and May 2023 in respect of the 12-month period 1 March 2022 to 28 February 2023, and also

2. The changes necessary for the 2023/24 Interim tax certificate submissions in September and October 2023 in respect of the 6-month period 1 March 2023 to 31 August 2023.

To determine the annual equivalent of remuneration for an employee with fluctuating income, you can use the following formula:
Annual Equivalent = (Year-to-Date Earnings ÷ Pay Periods Worked in Tax Year) x Total Pay Periods in Tax Year
Here’s how you can calculate the annual equivalent of remuneration for an employee:
1. Calculate the Year-to-Date (YTD) Earnings: Add up all the remuneration the employee has received up to the current point in the tax year.
2. Determine the Pay Periods Worked in the Tax Year: This includes all periods the employee worked in the tax year, regardless of whether they received remuneration during those periods. For example, if the employee worked for 3 months in the tax year, the pay periods worked would be 3.
3. Calculate the Total Pay Periods in the Tax Year: This represents the total number of pay periods in the tax year. For example, if there are 12 months in the tax year, the total pay periods would be 12.
4. Plug the values into the formula: Divide the Year-to-Date Earnings by the Pay Periods Worked in the Tax Year, and then multiply the result by the Total Pay Periods in the Tax Year to get the annual equivalent of remuneration.
By using this formula, you can annualize the fluctuating income of the employee to determine the annual equivalent for tax calculation purposes. This method helps in estimating the annual income based on the remuneration received during the period worked in the tax year.

The balance of remuneration is a specific definition in the tax act and is the portion left after deducting the allowable deductions (the amount in which paye is calculated on)

Summary of the latest payroll statutory rates and limits for 2022
The information in this article serves as a helpful resource for employers to confirm all the latest statutory rates and earnings limits including their effective dates. Department of Labour Rate Changes
Department of Labour
Old Rate
New Rate
Effective Date
UIF
R 17 712.00
R 17 712.00
1 March 2021
BCEA
R 211 596.30
R 224 080.48
1 March 2022
COIDA
R 506 473.00
R 529 264.00
1 March 2022
National Min Wage:
– General Worker
– Farm Worker
– Domestic Worker
– Public Works Program Worker
R 21.69 p/h
R 21.69 p/h
R 19.09 p/h
R 11.93 p/h
R 23.19 p/h
R 23.19 p/h
R 23.19 p/h
R 12.75 p/h
1 March 2022
SARS – Subsistence, Medical Aid and Other Important Rate Changes
SARS Rates
Old Rate
New Rate
Effective Date
Subsistence:
– Incidental Costs
– Incidental and Meals
R 139 p/day
R 452 p/day
R 152 p/day
R 493 p/day
1 March 2022
Medical Tax Credits:
– Main + 1 dependent
– All other dependents
R 332
R 224
R 347
R 234
1 March 2022
Rebates:
– Under 65
– Over 65
– Over 75
R 15 714
R 8 613
R 2 871
R 16 425
R 9 000
R 2 997
1 March 2022
Tax threshold:
– Under 65
– Over 65
– Over 75
R 87 300
R 135 15
R 151 100
R 91 250
R 141 250
R 157 900
1 March 2022
Expat Exempt Income
R 1 250 000
R 1 250 000
1 March 2020
Official Rate of Interest
4.5%
5.25%
24 March 2022
Prescribed Travel Re-imbursement Rate
SARS Rates
Old Rate
New Rate
Effective Date
Prescribed Travel Rate
R 3.82 p/km
R 4.18 p/km
1 March 2022
Travel Table | Determined Rates
Vehicle Value
Fixed Cost (R p.a.)
Fuel Cost (c/km)
Maintenance Cost (c/km)
R 0 – R 95 000
R 29 836
131.7
40.9
R 95 001 – R 190 000
R 52 889
147.0
51.1
R 190 001 – R 285 000
R 76 033
159.7
56.3
R 285 001 – R 380 000
R 96 197
171.8
61.5
R 380 001 – R 475 000
R 116 438
183.8
72.3
R 475 001 – R 570 000
R 137 735
210.8
84.9
R 570 001 – R 665 000
R 159 031
218.0
105.5
exceeding R 665 000
R 159 031
218.0
105.5
Tax Rates for the 2022-2023 Tax Year
Taxable Income
Rates of Tax
R 0 – R 226 000
18% of taxable income
R 226 001 – R 353 100
R 40 680 + 26% of taxable income above R 226 000
R 353 101 – R 488 700
R 73 726 + 31% of taxable income above R 353 100
R 488 701 – R 641 400
R 115 762 + 36% of taxable income above R 488 700
R 641 401 – R 817 600
R 170 734 + 39% of taxable income above R 641 400
R 817 601 – R 1 731 600
R 239 452 + 41% of taxable income above R 817 600
R 1 731 601 and above
R 614 192 + 45% of taxable income above R 1 731 600
*The above rates were accurate at the time of posting this article.