SimplePay has a built-in item to accommodate the special tax and reporting requirements related to employer loans. There are two steps you need to follow:
To add an employer loan:
- Go to Employees and select the relevant employee.
- Click on Add next to Regular Inputs and then Employer Loan.
- Enter the relevant information.
- Click Save.
If you are going to charge the employee interest, enter the rate next to Interest rate. Please be aware that interest-free or low-interest loans might have tax implications, as discussed below.
Regular repayment is the total amount that will be deducted from the employee’s pay each period. If you are charging the employee interest, the interest is never deducted directly from the payslip, but is rather added to the outstanding balance.
Click on Calculate Interest Benefit if the granting of the loan will give rise to a taxable benefit. Such a benefit will arise where an employer grants an employee a loan on which no interest, or interest at a rate lower than the official rate of interest, is charged. The value of the benefit is the difference between the amount of interest that would have been paid on the loan during the tax year at the official rate and the amount of interest (if any) actually incurred by the employee.
The official interest rate and historic rates can be found on this South African Revenue Service (SARS) page.
A taxable benefit will not arise in the case of the granting of:
- A casual loan or loans if the aggregate of such loans does not exceed the sum of R3 000 at any time.
- This applies to short-term loans granted at irregular intervals to employees and not all loans merely because they are less than R3 000. A taxable benefit would still arise if the loans were granted on a regular basis to all employees or a certain category of employees, irrespective of whether they exceed R3 000; or
- A loan for the purposes of enabling the employee to further his/her own studies.
Adding a loan to an employee tells SimplePay that the employee has a loan, but the loan will not yet have a balance, so no repayments will take place. To set a balance, click on Employer Loan under Payslip Inputs and enter the amount next to Balance Increase.
By default, an increase in loan balance is paid out on the current payslip and repayments only start on the next payslip.
If you don’t want to pay out the amount on the payslip, check Don’t pay out balance increase. You will then also have the option to check Balance increase is at beginning of period, which means repayment will start on the current payslip instead of the next.
Please note: if the balance you’re entering is the closing balance from the previous period, both checkboxes mentioned above should be checked.
Setting a Once-off Repayment will override any regular repayment defined for this loan.