There has been a few questions and enquiries about dealing with
The PAGSA has asked SARS for confirmation about ‘Covid-19 disaster relief organisations’ payments due to number 28-30 on their FAQ page.
These payments are made from the ‘SMME relief fund’ to assist SMME’s with existing payments like salary payments. The payments are made directly by the organisation (relief fund) but it will be treated as a loan (with special conditions) which the SMME must repay to the organisation.
In this case the organisation pays a ‘weekly allowance’ as a salary directly to qualifying employees.
We have previously communicated that this payment is excluded from remuneration (according to the revised draft Disaster Management Tax Relief Bill) therefore not subject to PAYE, UIF, SDL etc. but will be subject to income tax on assessment (please see extract below).
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However, SARS has now confirmed that even though the ‘organisation/relief fund’ pays the allowance, the SMME remains the employer for ETI and UIF purposes.
Therefore, this payment must be included in remuneration for ETI and UIF purposes and should only be excluded for calculating PAYE.
We are still waiting for confirmation about the procedural steps and which IRP5 code must be used (according to the SARS FAQ, code 3724 – but this has not been confirmed in a new BRS).
We are also still waiting for confirmation about the following:
- When the payroll system calculates remuneration for calculating the allowable tax deduction for contributions toward a retirement fund, should this payment be included in remuneration?
- When the limit for the tax deduction for donations made by the employee (normal donations and the solidarity fund donations) is calculated, should this payment be included in the remuneration?
- When the employer calculates ‘remuneration proxy’, should this payment be included?
- If the employer contributes towards a defined benefit or hybrid fund and the fund confirms that this value is pensionable salary, should this value be included as retirement funding income (RFI)?
Therefore, the suggested recommendation is that clients should not use IRP5 code 3602 (as previously communicated). Once we have confirmation we will inform everyone how these payments should be processed on the payroll.
As soon as we have any information, it will be communicated here on Sage City.