March 2019 | RSA – Bargaining Council Taxation

Bargaining Councils provide various funds for their members including sick, holiday and retirement funds. Employers contribute to the funds on their employee’s behalf as an employee and or employer contribution.

Amendments have been made to the Income tax act, referred to as ” Bargaining Council Tax Relief “, in order to give a tax relief to the councils for their historic non – compliance.

Previously, non – compliant Councils could pay a levy of 10% of the total PAYE that should have been deducted from all their payments made by them to their members from 1 March 2012 to 28 February 2017.

Going forward, Employer paid premiums to Bargaining Councils in respect of a scheme or fund as dictated in section 28 (1) (g) of the Labour Relations Act, as well as payments made to members, are now treated the same way as an employer paid contribution to a retirement fund and will be taxable for the employee.

Taxation Rules

The taxation rules for contributions to funds administered by Bargaining Councils are:

  • Employer paid contributions for the benefits of employees will constitute a taxable fringe benefit,
  • The value of the fringe benefit will be the value of the employer paid contribution,
  • Employee paid contributions are nonĀ  – taxable,
  • If these rules are adhered to, the payments made by the funds to the employees will be tax free.

These rules are applicable from 1 March 2019.

If the fund administrated by the Bargaining Council is a retirement fund, then the same taxation rules would apply as the Retirements funds.

System Impact

  • A new company contribution component has been set up for the company contribution (SARS tax code 4584), the system will calculate the fringe benefit component automatically (SARS tax code 3833).
  • The existing components used, would need to be migrated by the user to these new components, in order for the correct calculation to be applied.

These components are currently in development and will be available in due course. Kindly refer to the “Whats New” portal for updates.

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