Cricket chiefs ‘must repay bonus, with tax’
07 May 2012
Posted by: SAIT Technical
By Amanda Visser (Business Day 04 May 2012)
SUSPENDED cricket boss Gerald Majola will have to repay the total amount of the bonus allocated to him by Cricket SA and not only the after-tax amount deposited in his bank account.
Tax experts on Thursday confirmed that the Income Tax Act requires employers to withhold tax on bonuses and salaries. But it also requires full repayment from employees when money is returned to employers.
Mr Majola and former Cricket SA chief operations officer Don McIntosh must repay millions of rand in unauthorised bonuses.
Judge Chris Nicholson, who was appointed by Sports Minister Fikile Mbalula to probe the financial affairs of the cricket body, found R4,7m in bonuses paid to 40 of its staffers was not cleared by the organisation's board or remuneration committee.
The bonuses were paid after Cricket SA hosted the 2009 Indian Premier League (IPL) tournament in South Africa. Mr Majola and Mr McIntosh received R3,3m of the unauthorised bonuses.
Stian Klue, chief executive director of the South African Institute of Tax Practitioners, said if Mr Majola fell into the supertax bracket, he would have received 60% of the bonus after tax deductions — just over R1m.
"Mr Majola will therefore be required to repay the full bonus to Cricket SA, being the amount of R1,7m,” Mr Klue said on Thursday.
In 2009, Cricket SA's board decided to pay exceptional bonuses that amounted to eight times their staffers' monthly salaries. It was done on the assumption that they deserved a reward for bringing the IPL tournament to South Africa.
South African Revenue Service (SARS) spokesman Adrian Lackay said the act stipulated that if employees became liable to repay a bonus, it had to be returned to the employer. The employee will be entitled to claim the amount back as a deduction from SARS in the year the bonus is paid back.
Andrew Wellsted, head of tax at Norton Rose, said even though there was the possibility of a deduction, the relief would only be at the end of the tax year.
This would "certainly not assist” with the cash flow problem created by the repayment of the entire bonus, and not only the amount received.