The Good News in the Budget Speech and amended tax regulations published on Wednesday 24 February 2021 was that our PAYE tax will be marginally less with effect from 1 March 2021 as the tax parameters have been changed a little and the rebates we can claim have been increased slightly.
However, the Bad News is that the contribution to the Unemployment Insurance Fund have at last been adjusted to the benefit level.
In April 2017, the Unemployment Insurance Fund increased the maximum level for benefits to R17 711-58 however, the responsibility for increasing contributions to match this with an increase in the contribution. This responsibility lay with the Finance Minister and due to changes in Ministry at that time, no regulation in this regard was passed.
With effect from 1 March 2021 this will be corrected. This means that while everyone still contributes 1% of salary and companies are required to match this, those employees whose earnings are above R14 872-00 will contribute more to UIF. The maximum contribution level has now been set at R177.12.
What does this mean:
Example 1: Employee earning R16 000-00 per month.
|Tax Rate 2020||R1 633.58||UIF 2020||R148.72||Difference in earnings||R14 217.70|
|Tax Rate 2021||R1 571.00||UIF 2020||R160.00||Difference in earnings||R14 269.00|
|Tax Rate Difference||R 62.58||UIF Difference||-R 11.28||R 51.30|
Example 2: Employee earning R25 000-00 per month
|Tax Rate 2020||R3 880.83||UIF 2020||R148.72||Difference in earnings||R20 970.45|
|Tax Rate 2021||R3 749.17||UIF 2020||R177.12||Difference in earnings||R21 073.71|
|Tax Rate Difference||R 131.66||UIF Difference||-R 28.40||R 103.26|
It seems the Minister gives with one hand and takes away with the other. The benefit level remains unchanged.