The media is telling us that there is only good news for South Africa right now. The Economy is booming, the government has lots of cash and everyone is very busy. We are approaching the end of the first quarter with plenty of optimism and an election for new local government representatives. We wish Vusi well in his endeavour to be elected and are sorry to be losing him from the company.
Once again the Receiver has managed to reduce the amount of PAYE which we will be paying on a monthly basis. It is interesting to note that since 2001 the entry level for tax has gone from R21 110 per annum to R40 000.
In 2001 a person earning R40 000 per annum would have paid R3806.89 in tax, now he pays nothing.
A person earning R60 000 per annum would have paid R9 892.48 per annum. The tax rate at R60 000-00 per annum is now 6% of earnings, i.e. R3 600-00, a savings of R6 292.48.
In 2001 the marginal tax rate was 42% and was applicable to all earnings over R223 157-00. A person earning R223 157-00 per annum would have paid R78 444-23 in tax. In the new tax tables a person earning this amount would now pay R52 104-60. This is 50% less tax than he would have paid in 2001.
The marginal tax rate is now 40% and is applicable to earnings over R400 000-00. In 2001, a person earning R400 000-00 per annum would have paid R139 668-71 in tax. In the 2006 tables he would pay R79 000-00. A significant saving over the period.
The savings between the 2006 tax year and this year for a person earning R 400 000-00 per annum will be R9 900 and the effective tax rate on R400 000-00 will be an average of 27%.
Now for the bad news:
The fringe benefit tax on Company cars has been increased to 2.5% of the determined value of the vehicle. This is usually the cash cost of the vehicle excluding VAT. If an employee purchased a vehicle for R250 000-00 an amount of R6 250-00 per month will be added to the employees salary and taxed. At 40% the tax on this vehicle would be R2500-00.
On Car Allowances the fixed cost for vehicles has reduced significantly. For instance in the 2005 car allowance tables, the fixed cost for a vehicle worth R150 000-00 was R62 677-00. In the new tables this is now R47 512-00. However, the fuel cost and Maintenance costs have been increased. In the absence of a log book, the first 18 000 kilometres are deemed to be private.
For example, if an employee had a vehicle worth R150 000-00, in 2005 he could have claimed an allowance of R3 362-00. In the absence of a log book, he can now claim R2 863-00.
And for the final bit of bad news, 60% of the allowance must be included in the employee’s remuneration for tax purposes.
An amendment to the Sectorial Agreement for the Wholesale and Retail Industry was passed on the 25th January 2006. The amendment affects the minimum wages applicable in the industry with effect from 1 February 2006. It effectively provides for a 5.6% increase in salary for this year and gives the minimum increases for next year as “Previous Minimum Wage +CPCX+1%” as well as the rate for employees who work less than 27 hours per week. A copy of the amendment is available from the office.
The one third fringe benefit tax on medical aid paid for by the employer falls away. In future taxpayers will not be taxed on contributions to medical aid schemes of up to R500-00 for each of the first two people covered under a medical aid scheme and R300-00 for each additional dependent. For a typical family of four, this means that the first R1 600-00 of the cost of medical aid will be tax free, but the balance of the cost will be added to the employees salary for tax purposes.
Example: if your medical aid cost R2 800-00. In the old system a fringe benefit tax of R924-00 would have been added to your salary. Now with four members on the medical aid, an amount of R1 200-00 will be added to your salary.
He gives with one hand and takes away with the other.
At last, the government has had the courage to publish the Codes of Good Practice for BB BEE! These come very late in the day – they should have been available in 1998, when he Employment Equity Act was introduced. It was a long wait for the arrival of the Broad Based Black Economic Empowerment Act in 2003. The Draft Codes of Good Practice applicable to the Act followed in 2004 and, only now, do we have the finalised Codes.
Unfortunately, the previous lack of clarity has been replaced by complexity of ‘epidemic proportions’. This complexity does not only apply to large corporations, which can afford departments to manage their BB BEE initiatives, but also the small and medium size enterprises which now have various approaches to consider and select.
The most broadly relevant exemption is micro enterprises where annual revenue is currently less that R300 000 per annum excluding VAT. …after that the complexity starts………
Separate provisions apply to Small and Medium Size Business Enterprises. Categories include: very small, small or medium sized businesses; based on the number of employees and annual turnover. The categorization varies according to industry classification. One of two scorecards could apply: the qualifying small enterprise (QSE) Scorecard, or the Generic Scorecard.
Should the QSE Scorecard apply there are then further options available. Out of the 7 elements of measurement listed, enterprises may choose the 5 they wish to be measured on. Alternatively, they can score all 7, in which case a weighted average score will apply. Choices will depend on or be limited, to a large extent, on the nature of the business.
In summary: once the rubber meets the road in terms of BB BEE strategies, having good navigation skills becomes the imperative! These new measures require companies to re-look at what they have achieved to date. Appropriate adjustments need to be made to accelerate progress towards achieving the goals set for the short, medium and long term.
We need to start getting our information together, for both the ending of the Seta training year (31/3/06), and the start of the new training year.
Preparation of the Training Report requires ensuring that documentation is available to verify and confirm all the information provided to the seta (i.e. training invoices, attendance registers, accreditation of providers etc). The Seta’s are becoming more concerned with quality assuring the process, and companies can expect that they may be audited in the future.
Connold & Associates guide their clients accordingly, to ensure the individual seta requirements are met and that the mandatory grant of 50% of skills development levies paid for the year are re-imbursed.
The new Seta training year starts on the 01/04/2006 and the new Workplace Skills Plans will need to be submitted to Seta after that date. The process of planning training in line with organisational and individual needs should be in progress with the necessary consultation mechanisms in place.
We await with interest the new Discretionary Grant criteria, and have noted that due to the increased incidences of fraud the Seta’s are becoming more demanding with regard to the verification requirements.
2006/7 should be another year of opportunities and benefits to those companies who access their Seta initiatives.
2006 is a reporting year for all companies and EE plans must be submitted to the Department of Manpower by the 1st October 2006. The criteria for companies to comply with the act have not changed since the act was published in 1998. Many companies, who did not have to comply then, do have to know now so please look at the criteria below. Please ensure that if your company turnover and employee numbers mean that you now have to comply that you notify us as soon as possible so that the necessary committee can be put in place. In the EE act the procedure in developing the plan is as important as the plan itself.
|SECTOR OR SUBSECTIONS IN ACCORDANCE WITH THE STANDARD INDUSTRIAL CLASSIFICATION||TOTAL ANNUAL TURNOVER|
|Mining and Quarrying||R7.5 million|
|Electricity Gas and Water||R10 million|
|Retail and Motor Trade and Repair Services||R15 million|
|Wholesale Trade, Commercial Agents and Allied Services||R25 Million|
|Catering Accommodation and other Trade||R5 million|
|Transport, Storage and Communications||R10 million|
|Finance and Business Services||R10 million|
|Community, Social and Personal Services||R5 million|
South African companies and businesses determined to have a competitive advantage value and actively promote diversity and inclusion in the workplace and in their customer and service delivery. They need managers who are knowledgeable and skilled in the effective promotion and management of diversity for their clients and staff.
This one day participative programme will provide your managers with:
This programme will be delivered by YFA Consultancy and Training a UK based company on our behalf. A range of other diversity programmes are available including Leadership in Diversity for senior and strategic managers and Proactive about Diversity for your front line staff. Please contact us for further information.
With great effort and much battling with authorities (especially Telkom) we have finally moved into our new offices in Edenvale. Unfortunately, our contact details have also changed. Please note that in future the office can be contacted at the following numbers:
Telephone: +27 11 454 5485
Fax: +27 11 454 5523
Wishing you a successful year.