The deduction available for donations increased
To alleviate the cashflow difficulties of employees where their employers contribute to the Solidarity Fund on their behalf, Government is proposing a special relief measure by temporarily increasing the current 5% tax limit in the calculation of monthly PAYE of the employee. An additional limit of up to a maximum of 33.3% for three months or 16.66% for six months, depending on an employee’s circumstances, will be available.
This will ensure that the employee gets the deduction that is in excess of 5% much earlier than under normal circumstances and will therefore not have to wait until final assessment to claim a potential refund, provided the donation is made to the Solidarity Fund. It is, however, important to note that a final determination must still be made upon assessment as the employee may have other income, deductions or losses that impact the final taxable income before the deduction of donations.
Adjusting PAYE for donations made through the Employer
- In order to encourage South Africans to make contributions to the Solidarity Fund in line with the President’s call to action, it is proposed that the tax-deductible limit for donations, currently 10% of taxable income, be increased to 20% in respect of donations in cash or of property in kind donated and actually paid or transferred to the Solidarity Fund at the end of the year of assessment of the donor to the Solidarity Fund during the 2020/21 tax year. There will, thus, be a limit of 10% for any qualifying donations (including donations to the Solidarity Fund in excess of its specific limit) and an additional 10% for donations to the Solidarity Fund.
- The 20% tax-deductible limit for donations will apply only to donations made during the 2020/2021 tax year. Any donations over the limit made during the 2020/2021 tax year will be carried forward and deemed to be a donation made in the succeeding year of assessment (2021/2022) and be subject to the 10% limitation in that year.
Should have any queries with regard to the above please do not hesitate to contact us for professional advice.