Johannesburg, 13 Dec 2011
Rob Cooper, a payroll tax expert at Softline VIP, part of the Sage Group, says that 2012 will prove to be the starting year for a number of major new employment legislation initiatives.
“The new methods of granting a measure of tax relief on the contributions made to medical schemes will be implemented from March 2012, and is expected to be followed by similar amendments to the taxing of medical expenses in 2013. Staying with medical matters, contributions to the National Health Insurance (NHI) scheme are also expected to be introduced sometime during 2013,” says Cooper.
It is widely expected that the Youth Subsidy project, as proposed in the February 2011 budget and taken further in a white paper earlier in the year, will be implemented during 2012. Cooper says it is as a result of the unacceptably high levels of unemployment, particularly among young people. “This scheme, while being an essential part of a number of initiatives designed to increase employment levels, is proposed to be administered through the PAYE system and will pose a number of challenges to SARS, employers and payroll systems in the course of its implementation,” Cooper explains.
Further, there are two noteworthy pieces of legislation that are pending, says Cooper. “The tax administration Bill will extract administrative provisions from all Acts that fall under SARS and consolidate them into one Act. At this stage, it has no direct impact on employers or payrolls. The tax administration Bill, however, proposes a single number for all taxpayers in the future, which will again pose challenges to implement, but will streamline and simplify administration substantially in the future.”
Cooper says legislation surrounding retirement reforms are also on the cards. “As proposed in the February 2011 budget, there are plans to standardise the tax rules relating to retirement funds. The thinking is to standardise the provisions for pension and provident funds to resemble that of retirement annuities with a combined contribution deduction limit of 22.5% of taxable income. The legislation will most likely be delayed until March 2013, and will have an impact on HR and payroll administration.”
Another interesting piece of retirement reforming legislation that is pending is the proposal of a national retirement fund that will have a compulsory membership, Cooper explains. “Though the details are still very vague, it appears that the new system will have a three-tier structure, where the first tier will be similar to the existing old age grant, which allows people over 60 years of age to qualify for the benefit even if no contributions were made.
“The second tier will be a 'defined benefit' fund, with a mandatory contribution with a fixed accrual rate based on the individual's average lifetime earnings instead of on the final salary, and the third tier will allow individuals at their option to contribute a percentage of their income above R150 000,” says Cooper.
The expectation is that a discussion document on these proposals will be issued before the end of 2011. While the legislation could wind its way through Parliament during 2012, it will take a number of years for government to implement, adds Cooper.
Looking further ahead, SARS is still investigating the possibility of implementing a social security tax. “The legislation surrounding social security tax is, however, still on the table. In essence, the legislation will combine UIF, the road accident fund, social grants and the compensation fund under a 'social security' umbrella that will function as a holistic entity. It will effectively modernise and streamline the process,” explains Cooper.
SARS is also looking at amending labour legislation. “There are quite a few aspects surrounding labour legislation that are currently under review,” says Cooper.
* Close down or regulate labour brokers.
* Redefine an employer.
* Introduce the concept of 'decent work' into legislation.
* 'Widen' the definition of an employee.
* Introduce a national 'job placement' system.
Cooper says the labour legislation should be in draft form by no later than April 2012, and unless there is huge public opposition, could be promulgated into law by December 2012. The Minister of Labour is currently pushing very hard to move even faster than these dates.
“2012 will certainly be an interesting year as far as HR and payroll administrative changes are concerned. It will therefore be advisable for practitioners in the field to stay abreast of changes in the New Year,” concludes Cooper.
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