Tax: Inside the 2015 Budget

How will PAYE and Payroll be affected?

The marginal tax rates have been increased by 1% for individuals earning more than R181 900 and the tax brackets have been widened by 4,2% to provide relief for inflation-related earnings increases (fiscal drag).  Some R8,5 billion in tax relief will benefit individuals earning less than R450 000 per year.

Individual tax rates were increased and employees who earn in the upper brackets per annum will definitely see a decrease in net pay this year.  Payroll administrators should by now have implemented the new tax rates since an increase in taxes will affect the employee negatively and you don’t want to have to recover three or more months’ worth of increased taxes because of not deducting the correct amount from the start.  Usually, we were used to seeing a little extra at the bottom of the payslips after the budget speech, but this year will be the first time since 1995 that individual taxes have increased.

Where can business owners save? 

The budget presents few new opportunities for SMEs to save money.  However, last year’s Employment Tax Incentive (ETI) is a great opportunity for savings.  Employers that have not yet taken advantage of the excellent Employment Tax Incentive introduced last year should do so.  The ETI encourages employees to hire young people by reducing the PAYE that the employer is liable to pay so SARS based on the number of young people employed.  This reduces the cost of employment to the employer, while leaving the employee’s earnings unaffected.

New Tax Thresholds give SMEs a boost

The decision to increase tax threshold for micro-business owners means that those that have chosen to pay turnover tax will not pay tax if their turnover is lower than R335 000.  The threshold was previously R150 000, which means start-ups will have more money to fund their growth.

The other brackets for turnover tax have also been significantly adjusted.  A business with a turnover of R750 000 will now pay just R6 650 in tax rather than %15 000.  And businesses with a turnover of between R750 000 and R1 million will be taxed at 3% rather than 6%.

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