Kirsten Van Tonder – Page 14

27 Aug

As payroll administrators ourselves, we encounter a few frequently asked questions that employers, business owners or those responsible for payroll administration within organisations struggle with. Below we have a detailed answer for you on these burning questions you are facing. We hope that you find them insightful.

Question: At what stage is an employer required to register for PAYE and UIF with the South African Revenue Service?

Answer: An employer is required to register for PAYE and UIF the moment he/she employs an employee whose salary exceeds the tax threshold. For the 2020 tax year, this threshold is R 79 000 per annum.

Question: If an employer is already registered with SARS for UIF, does the employer also have to register with the Department of Labour for UIF purposes?

Answer: Yes. Although UIF payments are made to SARS and not to the Department of Labour, UIF Registration with the Department of Labour still needs to be completed and a UI19 form, in which the employer declares the amounts paid over to SARS, must be submitted monthly. The UI19 form can be submitted via e-mail.

Question: At what stage is an employer required to register for SDL (Skills Development Levy) with SARS?

Answer: An employer is required to register for SDL as soon as the total gross salaries of the organisation (all employees’ salaries) for any 12-month period exceeds R 500 000. Please note that SDL can only be claimed back for training provided from the relevant SETA to which the organisation belongs when the total salaries exceed R 500 000.

Question: I have submitted my W.As. 8 return to the Department of Labour but didn’t receive my W.As. 6 assessment. Why is this happening?

Answer: In most cases where this happens, we find that the e-mail address of the company is completed incorrectly on the return. For many organisations, this has resulted in significant amounts of interest incurred on these amounts. The original returns are no longer sent to organisations via post and are only sent via e-mail.

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

27 Aug

The 2019 Tax Season is here

Kirsten Van Tonder

Tax deadlines, gross income, Taxpayer

The 2019 tax season officially started on 1 July 2019.

Different filing periods apply, depending on the way a taxpayer chooses to submit their return:

Taxpayers who use e-filing to submit their returns have from 1 July 2019 until 4 December 2019.
Provisional taxpayers have until 31 January 2020.
Taxpayers who prefer to visit a SARS branch to physically submit their returns may submit between 1 August and 31 October 2019.

Companies and close corporations are not subject to the above-mentioned deadlines since the deadline for such entities’ income tax returns is 12 months after year-end.

The income threshold for submitting returns was increased from R350 000 to R500 000 for employees who received a single source of income from one employer during the year of assessment.

A natural person or estate of a deceased person will therefore not be required to submit a return if their gross income consists solely of any one or more of the following:

Remuneration not exceeding R500 000 from a single source with no additional benefits or claimable allowances, and employees’ tax has been withheld in respect of that remuneration;
Interest income from South Africa (excluding a tax-free savings account) less than
- R23 800 for a person younger than 65;
- R34 500 person aged between 65 and 75; or
- R23 800 for a deceased person’s estate;
Dividends where the individual was a non-resident throughout the year of assessment;
Amounts received or accrued from a tax-free savings account; and
Capital gains or losses of less than R40 000.

27 Aug

The importance of requesting reasons for an assessment by SARS

Kirsten Van Tonder

Tax Assessment, South African Revenue Service (SARS), Taxpayers

Generally, disputes with the South African Revenue Service (SARS) are the result of an assessment which has been issued by SARS to a taxpayer. An assessment is the determination of an amount of a tax liability or refund, by way of self-assessment by the taxpayer (such as in the case of VAT) or assessment by SARS (such as in the case of income tax). If taxpayers are not satisfied with an assessment, the Tax Administration Act provides for dispute resolution mechanisms, in terms of which taxpayers can object to the assessment, and subsequently appeal, if objections are not maintained.

Although objection to an assessment is the correct procedure to dispute a tax amount, taxpayers often lodge objections against assessments, without knowing exactly what they are objecting to. This could seriously jeopardise a taxpayer’s case, since taxpayers may not appeal on a ground that constitutes a new objection against a disputed assessment. If a valid ground of objection is therefore not addressed in the objection itself, taxpayers may lose the opportunity to object to a specific ground.

For example: when an assessment is raised by SARS because “expenses are not allowed as a deduction” it could be as a result of, among others, the following:

SARS considers the taxpayer not to carry on a trade;
SARS considers the expense not to have been incurred in the production of income;
SARS considers the expense not to have been actually incurred; or
SARS considers the expense to be of a capital nature.

Without having reasons for the assessment, the taxpayer cannot properly formulate its grounds of objection and may, therefore, find itself in a position where the real grounds for the assessment, may not be challenged on appeal.

In terms of Rule 6 of the dispute resolution rules, a taxpayer who is aggrieved by an assessment may request that SARS provide reasons for an assessment. The reasons provided by SARS must enable the taxpayer to formulate its grounds of objection. The reasons for any administrative action must include the reasons for the conclusion reached, and it is not enough to merely state the statutory grounds on which the decision is based or repeat the wording of the legislation. The decision-maker should furthermore set out his understanding of the relevant law.

A request for reasons for an assessment must be made within 30 business days from the date of assessment. Taxpayers (and their practitioners) are therefore encouraged to consider assessments as soon as they are issued by SARS. If there is any doubt as to why the assessment has been issued, a formal request for reasons should be issued without delay.

15 Jul

Innovation: How to manage it

Kirsten Van Tonder

Business Business, Companies, Innovation

Managing innovation? Why put a damper on creativity? No, that is not the idea. The purpose of managing innovation is to organise all the free-flowing ideas in order to avoid chaos and to actually put all the great ideas into action.

Here are the steps to how you can manage innovation:

Envision

To envision an idea is a critical step in the innovation management process. The envisioning process should put the plan in place to reach the innovation goals. Words alone are not enough. Leaders of innovative companies need to emphasise that innovation is a strategic imperative and they need to back up their words with their actions.

Engage

The next step, to engage, is where ideas are generated. In this process, companies engage employees, customers and partners to capture and share new ideas. To formalise the engagement process transforms it from an unfocused and ineffective “suggestion box” to a proactive and productive approach that efficiently produces targeted innovations.

Evolve

With this step, companies evolve ideas to increase their quality and value. Early feedback will allow ideas to be improved upon and problems to be raised so they can be solved or prevented. Give people a platform to exchange information, add comments and refine ideas, and remember, in order to get the most out of ideas, they need to mature. Developing these ideas in a virtual team setting provides the medium to bring group knowledge together and share it with subject matter experts, communities of interest and others by discussing, commenting and contributing to concepts.

Evaluate

Companies must identify the ideas that they believe will succeed. A lot of companies are overwhelmed by too many ideas. They want to use the “wisdom of the crowd” to provide some direction on where to focus. The goal is to take potentially thousands of ideas and turn them into a more reasonable number that you can evaluate. Companies can identify the best ideas by tracking which ideas are getting the most attention, views and comments. They can also provide mechanisms for the community to rate the ideas, from a simple “like” to providing specific feedback or validation on details like technical feasibility.

Execute

The best idea in the world will have no value unless it can be transformed into a reality. The execution process takes the input from the previous processes to execute an official project which will further build on the idea. Companies should have a repeatable project management method and should plan projects based on the deliverables to be completed. One of the clearest challenges that companies face in the execution phase is simply getting projects delivered on time and on budget while maintaining quality.

In conclusion, successful innovations are the result of carefully examining the target market and the available technology to meet customer needs. Essentially, innovation management means to be innovative in order to come up with solutions, before competitors have realised there is a problem.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

15 Jul

Capital gain: Calculating your foreign currency

Kirsten Van Tonder

Tax Income Tax Act, Tax, Taxpayers

With the fast approaching 2019 tax season, taxpayers who have realised a capital gain in a foreign currency should take note of the special rules that apply to the translation of those gains to Rand.

Generally, there are two ways of translating a capital gain or loss into Rand – a “simple method” and a more “comprehensive method”. Under the simple method, the capital gain or loss is determined in the foreign currency and then translated to Rand at the time of disposal. Under the comprehensive method, the expenditure (when acquiring the assets) is converted to Rand at the time it is incurred while the proceeds are translated to Rand at the time the asset is disposed of. The comprehensive method picks up the effect of currency appreciation or depreciation on the cost of the asset.

Paragraph 43(1) of the Eighth Schedule to the Income Tax Act applies when an individual disposes of an asset for proceeds in foreign currency after having incurred expenditure in respect of the asset in the same foreign currency. In these circumstances, the individual must translate the capital gain or loss into the local currency by applying the average exchange rate for the year of assessment in which the asset was disposed of or by using the spot rate on the date of disposal of the asset.

An individual that buys an asset in one foreign currency and disposes of it in another foreign currency must use paragraph 43(1A) to translate the proceeds and expenditure to the local currency as follows:

the proceeds into the local currency at the average exchange rate for the year of assessment in which that asset was disposed of or at the spot rate on the date of disposal of that asset; and
the expenditure incurred in respect of that asset into the local currency at the average exchange rate for the year of assessment during which that expenditure was incurred or at the spot rate on the date on which that expenditure was incurred.

The term “average exchange rate” (in relation to a year of assessment) is defined in the Income Tax Act as the average exchange rate determined by using the closing spot rates at the end of daily or monthly intervals during a year of assessment. This rate must be applied consistently within that year of assessment.

For ease of reference (although the use of these exchange rates are not compulsory) SARS provides average exchange rates for years of assessment ending on each month since December 2003 for the following currencies: Australian Dollar, Canadian Dollar; Euro, Hong Kong Dollar, Indian Rupee, Japanse Yen, Swiss Franc, UK Pound and US Dollar. (you can get these at the following link: https://www.sars.gov.za/Legal/Legal-Publications/Pages/Average-Exchange-Rates.aspx).

“Spot rate”, in turn, is defined as the appropriate quoted exchange rate at a specific time by any authorised dealer in foreign exchange for the delivery of currency. For spot rates, as well, SARS has a handy tool for rate conversions: https://tools.sars.gov.za/rex/rates/MultipleDefault.aspx.

The conversion of foreign currency gains and losses (primarily when incurred in different currencies), can present a practical difficulty, especially given the volatility of the Rand. Taxpayers are advised to consult with their tax practitioners on the conversion of gains and losses in foreign currency, particularly where these gains and losses are material. Making errors in this regard could lead to substantial penalties.

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