Tax break for employers to provide Low-income Housing

Posted On Monday, 22 July 2013 09:31 Published by Commercial Property News
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Tax Laws Amendment Bill allows employers to provide low-income housing worth up to R350000 to employees earning less than R200000/year.

 

Donald Fisher-JeffesCompanies will benefit from tax breaks and reduced administration when paying for employee housing, dividends and further education if the new Tax Laws Amendment Bill is adopted.
 
The bill, published for public comment on July 5, allows employers to provide low-income housing worth up to R350000 to employees earning less than R200000/year, without the employee incurring fringe benefit tax. Currently, employers levy a withholding tax on the benefit to employees provided with housing at below market value.
 
Treasury says the tax “effectively hinders the viability of these schemes”.
 
In the mining industry, employee accommodation is part of the employer’s responsibilities in terms of the mining charter.
 
Webber Wentzel senior tax manager Donald Fisher-Jeffes says removing the onus on companies to withhold the tax will give them an incentive to provide employees with low-income housing. “It will assist mining companies in fulfilling their accommodation responsibilities under the mining charter.”
 
Companies will also receive tax deductions for dividends paid to employees who hold a “restrictive equity share” under broad-based share schemes.
 
However, dividends will be taxed as ordinary income instead of at the 15% dividends tax in employee hands. Depending on the employee’s tax threshold this could mean higher taxes.
 
Treasury says the dividend yield from these instruments is a disguised low-taxed salary.
 
“The proposed amendments will result in less tax, and benefit shareholders while increasing the tax burden on employees,” says Fisher-Jeffes.
 
Increases to the monetary limits on bona fide bursaries and scholarships to employees are also proposed. Currently, companies get a tax exemption of up to R10000 when paying for the studies of an employee up to NQF level 4 or matric, if the employee earns less than R100000/year. This limit has been extended to R200000 with a new and separate R30000 qualifying amount for studies after matric.
 
Extending the limit to include high-income individuals will “enhance skills at all levels, including SA’s competitiveness”, says Fisher-Jeffes.

Source: FM

Last modified on Thursday, 13 March 2014 08:49

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