PAYE employers will have to register all staff for tax

For the 2010/11 tax year, all employers registered for Pay As You Earn will have to ensure that their employees have tax numbers, even if these employees do not qualify to pay tax.

By Laura du Preez

The South African Revenue Service (SARS) plans to make it compulsory for anyone who is paid by an employer that is registered for Pay As You Earn (PAYE) to register as a taxpayer, even if they earn below the tax threshold or are employed part time.

The new requirement will be mandatory from August this year, when employers are expected to submit the first of two declarations on PAYE deducted from their employees.

By then SARS expects to have introduced an online registration process that employers can use to register employees who do not have tax numbers, Mark Kingon, the group executive of business systems at SARS, says.

But already employers in at least one industry are refusing to hire casual or freelance employees who do not have tax numbers.

As part of its drive to modernise and improve tax processes for all employees, SARS is introducing requirements with which employers must comply when submitting their PAYE declarations. Some of the new requirements – but not the one that pertains to submitting tax numbers for all employees – apply to the current employers’ tax season, which began this month.

Employers have until May 31 to submit information to SARS about payments made to you during the tax year that ended on February 28 this year. SARS will use this information to pre-populate your income tax return.

But in August, when employers submit their first PAYE reconciliations for the current tax year (March 2010 to February 2011), it will be mandatory for your employer to submit a tax number for you. This will assist SARS to match the information on the income tax certificates (also known as IRP5 and IT3(a) certificates) that were issued to you.

Employers can then use the online registration process to register any employees who do not have tax numbers, Kingon says.

Employers in the film industry, which uses many casual or freelance employees – such as extras, crew workers and models – who are not currently registered for tax, are insisting that casual workers apply for tax numbers now, and employers will not hire such people if they do not have a tax number, Derek Serra, the head of the Casting Agencies Association, says. These workers may be employed for a particular film shoot but may not still be in employment in August, when SARS introduces its online registration process.

Serra says production houses may be loathe to take on the task of registering hundreds of extras who, until now, may not have needed a tax number. He says SARS should have informed workers of the need to be registered and how they should have gone about it.

Tax thresholds
If you are in what SARS refers to as standard employment, you are required to register for tax if your taxable income exceeds the greater of R60 000 or the tax threshold. The tax threshold is currently R57 000 a year for people below the age of 65 and R88 528 a year for people over the age of 65. If you work for an employer for more than 22 hours a week, you are regarded as being in standard employment for income tax purposes.

SARS has also announced that Standard Income Tax on Employees (SITE) will be scrapped from next year, when the tax threshold is likely to reach the threshold to which SITE is levied.

For the past two years, SARS has also not required taxpayers who earn R120 000 a year or less from a single employer to submit a tax return.

But Kingon says that although employees might not be required to apply to register for tax or to submit a tax return, this does not prevent SARS from registering you for tax and issuing you with a tax number. SARS wants employers to register all their employees and to issue them with tax numbers, Kingon says.

Currently, you can receive payments for standard employment from multiple employers that individually amount to less than the tax threshold.

If your employers are unaware that you are working for more than one company, they may not deduct the requisite tax even if your overall payments exceed R60 000 for the year.

SARS will, however, be able to issue tax returns to employees who are liable for tax if they are registered for tax.

If you are employed on an irregular or occasional basis and are paid daily or are paid casual commission, you are regarded as being in non-standard employment, and you will pay tax at a rate of 25 percent of your income. This also applies to part-time lecturers and the office bearers of organisations who earn honoraria. This tax may be refunded when you are assessed at the end of the tax year if your taxable earnings for the tax year do not warrant the tax.

Employers will also be required to register taxpayers in non-standard employment.

From this tax year, SARS will expect your employer to supply it with your banking details if you are paid directly via a bank transfer. If you are paid in cash or paid through a third party, such as a casting agency, your employer will not have to provide SARS with your banking details.

For next year’s tax season, your employer will also have to provide SARS with your residential address.

Anthea Scholtz, a tax director at Deloitte, says that if you are registered for income tax, you should be aware that you have various responsibilities, and SARS may impose penalties if you fail to fulfil them. You should, she says, make sure that you meet your obligations.

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