Your employment contracts MUST meet these 3 legal tax obligations
It's you legal obligation to give all employees written employment contracts. And in those contracts, you must very specific legal tax obligations.
Failure to do so can lead to a nasty audit by SARS.
So prevent SARS from tearing your employment contract apart by including these 3 items in them:
Item#1: The cash amount due to the employee
This includes the salary AND allowances. You must cover allowances thoroughly.
For example, if an employee of yours uses her own cell phone, laptop or transport for business reasons, then you must cover her with an allowance or reimburse her. But clearly specify any limits and procedures with regard to employee claims.
You should also describe all fringe benefits and attach a Rand value to these. Just remember to stick to the values approved in the Income Tax Act.
In essence, you should FULLY describe the remuneration structure.
Item#2: Contributions to benefit funds
If either you or the employee contribute to a benefit fund, including medical aid, pension or provident fund, then you must specify who contributes what.
But always remember that these contributions must be made in line with the rules of the schemes concerned. When SARS does a PAYE audit, they check actual payslips, payments and employment contracts with regard to the scheme rules to make sure that everything is in order.
Item#3: Details on who's responsible for costs if an employee uses her own tools
If an employee uses her own tools for her trade, you must detail who's responsible for the trade.
Now, it's important for you to note that if, for example, your employee receives an allowance for his cell phone, he'll be taxed on the allowance and can't deduct his actual expenses.
In this case it's better that you reimburse her for the actual expenses, rather than give her an allowance.
: If your employee uses his or her cell phone for business purposes, then it's better that you get her one. There's no fringe benefit on this, which means that your employee can use them without having to pay extra tax. Plus, you can deduct the costs and expenses from your own taxable income.
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