The Minister for Finance’s speech on 23 April reiterated much of the information laid out in the President’s speech on 21 April, outlining the size of the budget as well as the 4 key components to counter the pandemic.
Despite the fact that not all of the components directly link to supporting businesses, they are useful to show how the Government is allocating the funding and give a clearer picture for the near future. We’ve covered each of these below, starting with the measures most relevant to you, your businesses and your employees.
1. Support for Companies and Workers
In a nutshell, these are the schemes mentioned in the speech:
- An increase in the expanded Employment Tax Incentive (ETI) amount from R500 to R750 per employee.
- A skills development levy holiday of 4 months from 1 May to 31 August 2020. This will work by the EMP201 SDL contribution defaulting to zero for these months. We are awaiting clarity on the proposed changes, so we can accommodate this on our system.
- Fast-tracking VAT refunds.
- Deferring the payment of excise duty on alcoholic beverages and tobacco products.
- A three-month deferral for filing and first payment of carbon tax liabilities to 31 October 2020.
- A postponement of some of the corporate tax proposals in this year’s Budget on interest expenses and assessed losses.
- An increase in the deferment of employee’s tax.
- An increase in the turnover threshold for automatic deferrals.
- Donations to the Solidarity Fund can offset your tax liability. Up to a third of such donations will be tax deductible. The limits for payroll giving to the Solidarity Fund shall be increased – including in determining the monthly withholding of employees’ tax.
- Finally, access to living annuity funds have been expanded by allowing individual to adjust the proportion they receive as annuity income, instead of waiting up to one year until their next contract anniversary date.
We are awaiting further guidance on different aspects of this list and will make any necessary changes to the system, as well as provide updates as soon as possible.
Several of the above points are reiterations of schemes which we have outlined in previous blogs, including our first and second recap blogs. There are one or 2 points that stand out from the list, such as the increase in ETI to R750 per employee and access to living annuity funds.
It is not yet clear whether this increase in ETI is meant to be implemented from 1 April or 1 May, the latter being the more logical. We are in touch with the relevant stakeholders to ensure that we have the most up to date information possible. We shall update you as and when we know more, as well as when the necessary changes have been implemented in SimplePay.
Further support for businesses is provided in the COVID-19 loan guarantee scheme. This was mentioned in the 23 April update blog, and will assist businesses with a turnover of less than R300 million, with operational costs such as salaries. The core feature of the loan is that repayment of interest and capital starts after 6 months, with a maximum of 60 months to pay off the loan in full.
The National Treasury will be working with private banks and the South African Reserve Bank (SARB) to facilitate this scheme. More information on the scheme can be found on the National Treasury website and in their dedicated PDF, linked here. It is expected that the first banks should be ready to accommodate this scheme before the end of the month.
2. Extraordinary Health Budget
The Government is setting aside an amount of R20 billion, directed at aiding efforts with dealing with the pandemic.
3. Relief of Hunger and Social Distress
Several different measures have been put in place to address this heading, as the lockdown has so drastically affected those living from hand to mouth.
R50 billion has been directed toward relieving those who are desperately affected by COVID-19. This will be utilised in the following ways:
- COVID-19 Relief of Distress Grant will pay R350 per month for 6 months, to individuals that are unemployed and do not receive any other form of social grant or UIF. More information can be found on the Department for Social Development website, linked here.
- Child Support Grant beneficiaries will receive an extra R300 in May.
- From June to October, caregivers will get an additional R500 per month. All other grants will be topped up by R250.
4. Phased Re-Opening of the Economy
Under this final heading, Mr Mboweni focused on the need for screening and testing of individuals going back to work, with an overall cautious tone. Where risks do re-emerge, localised lockdowns will be put back in place.
Under this heading, three key phases are being put in place for the coming month, aiming to balance the protection of lives with an economically sustainable future:
- Phase 1 – This is the current phase, which is aimed at preserving the economy. This comes in the form of immediate, targeted and temporary fiscal responses.
- Phase 2 – This phase plans the recovery from the immediate effects of the crisis. Further detail of this step is still to be given.
- Phase 3 – This phase implements a “pivot”, where the economy shall be positioned to encourage higher rates of growth.
All in all, the speech although providing more detail on many aspects of the President’s speech on 21 April, also leaves many questions unanswered. We shall endeavour to tie up these ends as this information becomes available, which for many hopefully will be upon the release of the amended Disaster Management Act (DMA) Bill on 30 April.
We hope that this information proves useful to you. If you have any queries on how the above relates to payroll and the SimplePay system, please feel free to get in touch with our customer support team at [email protected].
Keep well. Stay home. Stay safe.