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PAYE taxation of death and disability insurance of approved and unapproved funds

17 March 2014   (0 Comments)
Posted by: Author: SAIT Technical
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Author: SAIT Technical

The answer to this query is based on legislation as at 2014/03/17.

Q: How is the death and disability insurance of approved and unapproved funds taxed on the payroll?

A: In terms of the amendments to paragraph 2(k) of the Seventh Schedule to the Income Tax Act, Act 58 of 1962, as amended, any direct or indirect contribution by an employer to an insurer in respect of insurance benefits for the benefit of an employee, his spouse, children, dependent or nominee will constitute as a taxable fringe benefit in the employees’ hands.

The cash equivalent of this taxable benefit is calculated in accordance with the new paragraph 12C of the Seventh Schedule, and is the amount of the expenditure incurred by the employer in respect of any premium payable. IRP5/IT3(a) detail: The taxable benefit must be indicated under the income code 3801 on the IRP5/IT3 (a) certificates.


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