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PAYE Reforms: A Profoundly Good Piece Of Work

10 April 2008   (0 Comments)
Posted by: Author: Grant Lloyd
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PAYE Reforms: A Profoundly Good Piece Of Work

The recent reform of the PAYE tax dispensation by SARS is a profoundly good piece of work.Laying down specific requirements for both employers and employees, the way the new dispensation is structured has major impacts.The primary objective is to ensure that life becomes much easier for honest taxpayers and much more difficult for dishonest taxpayers and tax evaders.

SARS has really put a lot of thought into the new dispensation and the streamlining of the process.I see it as the important first leg of an overall conversion to a totally electronic taxation system, along the lines of the one that has proved so successful in Australia.

The overall process will be more streamlined, enabling returns to be submitted more quickly and more accurately, which in turn will facilitate quicker processing by SARS and quicker settlement of amounts owing to taxpayers who have paid more than they need to.Companies with automatic payroll software will also find the new dispensation very easy to accommodate.

By raising the personal tax earnings threshold for no return required to R120 000 a year SARS is also reducing the total of returns to be processed by 800 000 individuals. While those people still have to register with SARS and pay PAYE every month, they are not required to submit a formal annual tax return thereby decreasing overall tax assessment traffic and helping to speed up the process for those who do have to submit.

With the individual tax return submission "filing season” this year reduced to just seven weeks (1 September to 21 November) for manual submissions SARS is encouraging people to convert to electronic returns by allowing eFiling system users another six weeks (until 23 January 2009) to make their submission.

A dynamic single tax return for individuals that will be customised and pre-populated with verified IRP5
and IT3A information received from employers will result in accurate returns that are much easier to complete.

Tax returns will be provided by SARS on request, encouraging people to use eFiling.The forms are a standard two pages and by answering the questions and entering only relevant information each becomes tailored to the individual’s circumstances. If an individual’s only source of income is his job the form is extremely simple and straight for ward.However, if the person has other sources of income such as investments or receives rental income from properties owned - then the form is customised accordingly.A nice touch from SARS is that it now also offers a facility to fill in the tax return form off-line, which ensures that no data is lost if a power failure or other Internet connection failure occurs.

Taxpayers probably have two to three years to phase out of submitting paper returns manually.A service that will encourage people to make that migration is the SARS free software that allows tax certificates to be captured electronically or printed out and submitted manually.That clearly demonstrates that electronic is more effective and time-efficient.While offering taxpayers a choice of language for submission could pose some challenges in the processing of returns, SARS has obviously done its homework well and the new system will also offer benefits to accountants and tax practitioners.

The pre-populated returns will reduce the manual workload for tax practitioners and result in fewer transcription errors.The new tax calculator that can be used to calculate the assessed liability upfront will also save time and effort.Overall, the new dispensation should also create new business opportunities in servicing employers that do not have the skills set to electronically complete the new EMP501 or electronically capture tax certificates.

Source: By Grant Lloyd (TaxTALK)


Section 240A of the Tax Administration Act, 2011 (as amended) requires that all tax practitioners register with a recognized controlling body before 1 July 2013. It is a criminal offense to not register with both a recognized controlling body and SARS.


The Act requires that a minimum academic and practical requirments be set to register with a controlling body. Click here for the minimum requirements of SAIT.

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