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Staff Salary Advance Tax Implications
- 13 March 2024
- Salaried Employees
- The Tax Faculty Tax Specialist
This FAQ article is based on tax law for the year ending 29 February 2024.
1. The Problem / Facts
Is a salary advancement treated as employee loans or advances and are there any tax implications that should be considered?
2. Applicable Law
Paragraphs 2(f), 10A and 11 of the Seventh Schedule of the Income Tax Act
SARS external guide for employers in respect of fringe benefits
3. Application of the Law to the Facts
Debt incurred by an employee is considered a taxable benefit, particularly if it's interest-free or carries an interest rate below the official rate. A specific exclusion exists for debts that do not exceed R3,000 at any time during the year of assessment. No value is placed on only short-term, irregular debts and not on all debts under R3,000. Regular debts granted to all employees or specific categories of employees that do not exceed R3,000 can still constitute a taxable benefit.
The use of advancements rather than loans is playing with semantics. One will have to look not at the name but the nature and characteristics of the transaction.
If you missed the face-face workshops with Diane covering the Annual Budget and Tax Update, don't worry, catch the online webinar 19-20 March. Click here to book.