Benefits of a cloud accounting approach

In recent years, cloud technology has revolutionised our day-to-day lives. We post our family photos to Facebook and Instagram, we pay our monthly bills through online banking, we order and pay for our groceries online and we use our smartphones to check our email on the move.

So, if we are utilising the cloud in our everyday lives, why are we not doing the same in our business lives?

Cloud-based accounting software now offers all the functionality and reliability of your tried and trusted desktop accounting system, but with a number of additional benefits that only online technology can deliver.

If your business is looking for a more effective way to manage its financial affairs, here are six reasons for seriously considering a move to cloud accounting.

  1. Mobile access at any time
  • With cloud accounting, you can access your accounts and financial figures at any time, from anywhere. When you use an old-fashioned, desktop-based system, you are effectively tied to the office. Your software, your data and your accounts are all located on a local drive. That limits the access you can have to your financial information. Cloud-based accounting frees you up from this restriction. Your data and records are all safely encrypted and stored on a cloud server, and there is no software application for you to download – you log in and work from your web browser, wherever you have Wi-Fi and an Internet connection. So, wherever you are, you can always check on the status of your business.
  1. A cost and time-effective solution
  • Working online reduces your IT costs and saves you time by keeping you constantly connected to the business.
  • Desktop-based systems require an investment in IT hardware, plus the maintenance of that hardware. You require a server to house the application software and the related data. In addition to that, you will need to pay an IT expert to maintain both the server and the office network – that can be an expensive overhead.
  • Online accounting is carried out entirely from the cloud. There is no costly IT infrastructure for you to maintain, and you can access the software whether you are in the office, working from your dining room table or out at a meeting. Rather than waiting until you are back at the office, you can immediately approve payments, or send out invoices to customers, saving you time and making your financial processes far more effective.
  1. Watertight security and no time-consuming back-ups
  • When you are cloud-based, your accounts and records are all saved and backed up with military levels of encryption. If you have used desktop accounting, you will be aware of the need to back-up your work at the end of each day, and you will also know about the need for updates each time your provider brings out a new version of the software.
  • On a cloud platform, back-ups and software updates become a thing of the past. You’re always logged in to the most up-to-date version of the software, with all the latest functions, tax rates and necessary returns. In addition to that, your work is saved automatically as you go, so you save both time and money on tedious back-up procedures.
  • Security is another area where cloud accounting outperforms a desktop system. Your data is no longer located on a physical server in the office, or on the hard drive of your laptop. All your accounting information is encrypted at source and saved to the cloud. The only person who can access your confidential information is you, plus selected members of your team and advisers.
  1. Share and collaborate with ease
  • Working with colleagues, and sharing data with your advisers, is an extremely straightforward process when you’re based in the cloud.
  • Using the old, desktop approach, you had limited access to your accounts – and that made collaboration with colleagues and advisers difficult. If your accountant needed specific numbers, they would need to be emailed back and forth, or saved to USB memory stick and couriered directly to their office.
  • With an online accounting system, you, your colleagues, your management team and your advisers can all access the same numbers – instantly, from any geographical location. So, collaboration is as easy as picking up the phone and logging in to your online accounting package of choice, with the key numbers in front of you.
  1. Reduces paperwork and is more sustainable
  • Using cloud accounting can deliver the dream of having a paperless office. With traditional accounting, dealing with paperwork, data-entry and financial admin can start to eat into your business time. Everything must be printed out and dealt with in hard copy, and this is slow, ineffective and bad for the environment.
  • With an online accounting system, you can significantly reduce your reliance on paperwork. Invoices can be emailed out directly to clients, removing the costs of printing and postage – and speeding up the payment process. Incoming bills and receipts can be scanned and saved directly with the associated transactions in your accounting software.
  • Because your documents are all digitised and stored in the cloud, there is no need to keep the paper originals – saving on filing space and storage costs.
  1. Better control of your financial processes
  • The efficiencies of online accounting software give you greatly improved control of your core financial processes.
  • Online invoicing function streamlines the whole invoice process, giving you a better view of expected income, an overview of outstanding debts and a clear breakdown of what each customer owes your business.

Are you beginning to see the benefits of a cloud accounting approach for your financial management?

If you are currently using a desktop-based accounting system, and want to see first-hand how cloud accounting can benefit your business, please do get in touch with us for a demo of an online accounting package that best suits the needs of both your business and your financial team.

Give us a shout and let us assist you in moving to cloud accounting.

http://www.nwandaonline.co.za/

Print Friendly, PDF & Email

Managerial accounting: The key to better business

As a manager of an organisation, there is a great responsibility for decision making. The question lies in how a manager can utilise accounting information to make better decisions. Managerial accounting is a common practice within an organisation where accounting information is identified, measured, analysed, interpreted and communicated to relevant parties to pursue a goal.

Accounting information can be analysed in different ways and be used for different purposes. It’s important to identify the type of decision that needs to be made to ensure that the correct accounting information is gathered and analysed for the best decision making.

For instance, an organisation that wants to attract investors will depend mostly on cash flow statements and cash flow forecasts, the income statement and a balance sheet, whereas an organisation that needs to apply for a loan will rather look into certain ratios such as debt to equity and debt to service coverage ratios.

Managerial accounting is mostly used in scenarios where quick decisions need to be made to help managers optimise business operations. Accounting information is used by managers to plan, evaluate the company performance and manage risks. Budgeting is a great part of an organisation and financial reporting can help a manager to set a realistic budget and identify the need for funding. To measure the company’s performance certain ratios can be used such as the liquidity ratio which measures the company’s ability to generate cash to meet the short-term financial commitments, efficiency ratio that mostly relates to the inventory turnover and the profitability ratio can be used to measure the return on assets and net profit margins.

The first step to making an informed decision is to have information that is reliable and up to date, thereafter the accounting information can be utilised in different ways to ultimately form a report that would help management to make better decisions.

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted. (E&OE)

Print Friendly, PDF & Email

What should you consider when investing in a business

You have worked hard for many years, and have finally saved enough funds and mustered the courage to take the big leap that you have been dreaming about for such a long time… you are going to invest in your own business.
 
You have found the perfect business and is excited about your new journey, when you suddenly realise, however, that you have never been in this situation, and suddenly have no idea what to do next.
 
The first step
 
It is important to understand what you wish to gain out of your investment. Some people may solely invest in a business for financial gain, while for others it may be fulfilling a life-long dream, or to chase a very specific passion, such as having the opportunity to jump out of an airplane every single day through your newly acquired skydiving school, for instance.
 
Although motivation will differ for each person and will likely include a number of factors, it is important to understand what drives your decisions, in order to invest smartly.
 
Start with the end in mind
 
Once you understand the why behind your investment decision, it is a good principle to start with the end in mind. Ask yourself where do I want to be in the next three to five years (skydiving every day, the richest person in my street, having loads of free time, etc.) and how you will be able to leverage your business to get you there.
 
Good questions to ask might include –

  1. Is the business scalable (the ability to multiply a business model);
  2. Is the business labour / time intensive;
  3. Do you have adequate and necessary skills to manage the business;
  4. Are you aware of all the risks that you are assuming through investment;
  5. Is the price that you are willing to pay for the business substantiated and reasonable;
  6. Etc;
Practical considerations
 
In practical terms, there are a number of ways in which to invest in a business, primarily including acquisition of a going concern, as opposed to equity / members interest in an existing entity. It is also important to understand the advantages / disadvantages of the structure in which you choose to invest. You might decide to invest as a sole proprietor, through a company, a corporate structure or a trust (etc.) for instance.
 
The above considerations can have a major influence on a variety of factors, including statutory risk, tax consequences, contracting procedures, etc. and if the process is not approached correctly, it can cause many unnecessary headaches in the long-run.
 
Summary
 
Investing in a business, is no doubt always a very exciting prospect which, if approached correctly, can have a profoundly positive impact on a person’s life. It can be a precarious process, however, if not negotiated carefully.
 
It is therefore recommended to find a credible and experienced partner, to help guide you through the process, and even to further strategically aid and assist you post the investment.
 
This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted. (E&OE)
Print Friendly, PDF & Email

Management’s responsibility

Throughout the audit of a set of financial statements, the phrase “management/director’s responsibility” appears. It is included in the engagement letter, the financial statements and the auditor’s report.  But what does it mean?

Management is responsible for the management of the business, for implementing and monitoring of internal controls in the business, and in terms of the Companies Act (“the Act”), for maintaining adequate accounting records and the content and integrity of the financial statements.  These financial statements must be issued annually to reflect the results thereof.

These financial statements are used by various users (shareholders, directors, banks, SARS, etc.) to make certain decisions (buying and selling of shares, valuations, credit terms, etc.), and therefore need to be a true representation of the business.  It is therefore critical that all transactions are valid, are recorded accurately and completely in the correct financial year, are classified correctly, and that all assets and liabilities that exist are recorded at the true cost/value thereof.

In terms of the Act, financial statements are to be prepared using either International Financial Reporting Standards (“IFRS”) or IFRS for Small to Medium-sized Entities (“IFRS for SME’s”).  Luckily management is not responsible to be experts in the above-mentioned standards, as the Act does allow for management to delegate the task of preparing the financial statements to someone with the knowledge and skill set to be able to perform this task.  The Act does, however, not allow management to delegate the responsibilities that go along with it too, so they need to ensure that when they do delegate the task, that it is to a responsible person and that they review the financial statements before approving it.

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

Print Friendly, PDF & Email

Validity of voetstoots clauses under the Consumer Protection Act

Consumers often opt to purchase second-hand goods in order to save money or because of the mere fact that they stumbled upon a bargain. Second-hand goods, although a possible bargain, can be risky to buy as it may contain defects, and the consumer’s recourse in such an event can be severely limited. This concern relating to defects is considerably increased when buying high-value second-hand goods such as motor vehicles, where latent defects can cost a lot of money to repair – often leaving the consumer in a position where he or she is spending significant amounts of money repairing the defects whilst still paying off the initial purchase price.

The biggest limitation of the consumer’s right to recourse when buying faulty goods is the inclusion of the so-called “voetstoots” clause which is often included in verbal or written sale agreements. These clauses are often referred to as “as is” clauses since it literally means that the consumer is buying the product as it stands, with all latent and patent defects included. The seller can then not be held liable for damages under the common law once such defects are discovered, thus leaving the consumer without a remedy.

However, this traditional position as set out above has been dramatically altered in respect of second-hand goods sold by a supplier who is rendering goods or services in the ordinary course of his or her business (this will include most sellers who are not private persons merely selling his or her goods on a once-off basis). This protection is afforded to consumers purchasing both new and second-hand goods by the CPA.

Section 55 of the CPA sets certain standards with which goods sold by suppliers must comply with. This section requires firstly that goods must be reasonably suitable for the purpose for which they are generally intended. The goods must secondly be of a good quality, in a good working order and free of any defects. The goods must lastly also be useable and durable for a reasonable period of time, having regard to the use to which they would normally be put to and with regard to any relevant circumstances.

Section 56 of the CPA creates the implied warranty according to which consumers have certain remedies if the above standards are not met. Consumers may, according to this implied warranty, return such defective goods for repair, refund, or replacement. This warranty is valid for a period of 6 months from the date of purchase.

It is thus clear from the above discussion that the traditional voetstoots clause which was valid under the common law no longer protects sellers against liability for faulty goods. However, a voetstoots clause which specifically states what the condition of the item being sold is and which lists all the defects which are present will be valid in terms of the CPA if the consumer then expressly accepts it. This is the position since the consumer would not be prejudiced as he or she will be aware of the defects and thus make an informed decision.

It is furthermore important to note that neither the standards as set out in section 55 nor the warranty contained in section 56 can be excluded from a sale agreement. The consumer is thus always protected. Consumers considering to buy a second-hand motor vehicle or some other high-value second-hand item would thus be wise to rather buy such an item from a dealership as opposed to a private person who is entering into a once-off sale, since voetstoots clauses between private persons entering into a sale agreement will still be valid (except if such private person wilfully concealed the defects).

Reference List:

  • Consumer Protection Act 68 of 2008
  • Advisory Note 1: Consumer Goods and Service Ombud
  • Consumer Protection Guide for Lawyers: Law Society of South Africa
  • Right to Return Goods in Terms of Section 56 of the CPA: SEESA

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

Print Friendly, PDF & Email

Fringe benefits provided to employees

The Seventh Schedule to the Income Tax Act[1] lists various benefits that employers may grant to employees which will attract income tax for the employee,[2] and require the employer to also withhold PAYE on the amount of the benefit granted.[3] These provisions act as anti-avoidance measures to avoid employees receiving “masked” remuneration in formats other than cash in order to avoid a liability for income tax.

The Seventh Schedule identifies a number of such taxable fringe benefits, and further quantifies the cash flow equivalent of that benefit for purposes of inclusion ultimately in the employee’s taxable income. These taxable benefits provided by employers to employees include:[4]

  1. The acquisition by the employee of assets from the employer at less than its value;
  2. The right to use an asset for free or without the employee paying adequate consideration for the use thereof;
  3. Free meals, refreshments or vouchers to that effect;
  4. Free or cheap residential accommodation;
  5. Free or cheap services provided or sourced by the employer for the benefit of the employee;
  6. Where the employer provides an interest-free or low-interest loan to an employee;
  7. Where the employer pays all of, or a portion of, the employee’s debt owed to another person, with no recourse to the employee;
  8. The employer settles any direct or indirect medical costs incurred by the employee and to the benefit of the employee him/herself, as well as any other dependents;
  9. Contributions made by the employer to any insurance policy which will benefit the employee; and
  10. Contributions by the employer to any retirement type fund on behalf of the employee.

Fringe benefits further also extend to where the above benefits are granted to family members of the employee, or any other person where those benefits are extended by virtue of an arrangement between the employer and the employee and which is granted as a result of the existence of the employment relationship.[5]

Given the very wide definition afforded to the word “employee” for purposes of the fringe benefit regime,[6] we often find that clients are surprised at the very wide potential application of the above benefits, be it to the employee directly or not. Given that the PAYE regime, affected by the above mentioned, carries a potential penalty of imprisonment for up to twelve months in instances of wilful contravention or contravention without just cause,[7] it is of the utmost importance that employers too are completely up to date with and aware of the obligations that they may have towards SARS and arising from fringe benefits provided to employees.

[1] 58 of 1962.

[2] See paragraph (i) of the specific inclusions in the “gross income” definition in section 1 of the Income Tax Act.

[3] Paragraph 2 of the Fourth Schedule to the Income Tax Act.

[4] Paragraph 2 of the Seventh Schedule to the Income Tax Act.

[5] Paragraph 16 of the Seventh Schedule to the Income Tax Act.

[6] Paragraph 1 of the Fourth Schedule read with paragraph 1 of the Seventh Schedule to the Income Tax Act.

[7] Paragraph 30(1) of the Fourth Schedule to the Income Tax Act.

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

Print Friendly, PDF & Email

Removing Directors of a Company

The Companies Act, 71 of 2008, requires that the business and affairs of any company be managed by or under the direction of its board, which has the authority to exercise all of the powers and perform any of the functions of the company, except to the extent that the Companies Act or the company’s Memorandum of Incorporation provides otherwise (section 66(1)). The Companies Act further requires that a company must have at least one director (section 66(2)), and further that only natural persons may serve in that capacity (section 69(7)(a)).Those individuals occupying the position of directors of a company are therefore responsible for managing the affairs of the company and they do so as custodians on the shareholders behalf. It should be remembered that the directors do not own the company: the company rather is owned by the shareholders and the directors serve to promote the interests of the company, and indirectly the economic interests of the shareholders. Quite often, in the case of private companies, the directors and shareholders may be the same individuals. However, where the directors have no or limited shareholding interest in the company itself, it may happen that the shareholders may wish to move to have certain directors removed and replaced on the company’s board if e.g. the company’s financial performance or operations are not satisfactorily conducted according to the shareholders’ liking.

Naturally, a director may be requested to resign under amicable circumstances. However, where a director refuses to resign (and may perhaps have the backing of other shareholders), the question becomes what remedies the aggrieved shareholders still have? It is possible to have these matters regulated in terms of the company’s Memorandum of Incorporation specifically to dictate under which circumstances a director may be removed from the board of a company. It could also be agreed with the director initially by way of a clause in the appointment contract.

Irrespective of whether the Memorandum of Incorporation or an appointment contract addresses the matter specifically, a director may always be removed by way of a majority vote at an ordinary shareholders’ meeting (section 77(1)). Before the shareholders of a company may consider such a resolution though, the director concerned must be given notice of the meeting and the resolution, and be afforded a reasonable opportunity to make a presentation, in person or through a representative, to the meeting, before the resolution is put to a vote (section 77(2)). In terms of procedures not entirely different from that as applied to shareholders, the directors may among themselves resolve to remove a director from the board of a company (sections 77(3) & (4)).

It is important for directors to realise that they serve at the pleasure of shareholders. It is likewise necessary for shareholders to know that they have remedies against directors who do not deliver on their mandate, and that keeping directors in check amounts to good corporate governance.

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

Print Friendly, PDF & Email

Employment Equity 2016

Who must report in 2016…

• All designated employers with 50 or more employees.
• Employers with fewer than 50 employees who are designated in terms of the turnover threshold applicable to designated employers (Schedule 4 of the Employment Equity Amendment Act No. 47 of 2013).
• Employers who have become newly designated on or after the first working day of April, but before the first working day of October, must only submit their first report on the first working day of October in the following year.
• Employers who voluntarily wish to comply in terms of section 14 of the EE Act.
• All designated employers must report annually irrespective of their size.

Useful Advice

• Manual and posted EE Reports will not be accepted after 3rd October 2016.
• EE Reports will not be accepted by fax or email.
• Check for incomplete sections or sections with errors.
• In the case of Online submission, complete and finalise corrections in the EE Reports by no later than 15 January 2017.
• Do not forget to press the submit button when your report is complete.
• No Changes are allowed after submission.
• A copy of the EEA2, EEA4 and the acknowledgement letter will be emailed to you after successful submission.
• If you have not received the EE reports and acknowledgement letter in your Inbox, please check in the Junk mail/Spam folders (Move mail from the Junk mail/Spam folders to Inbox before opening the attachments).

The Commission for Employment Equity Annual Report 2015-2016 make for interesting reading, enclosed please find the 16th CEE Annual Report.

EE threshold

The Employment Equity (schedule 4) sector threshold that determines whether a company is a designated employer has been revised. A designated employer is any employer employing more than 50 employees. If there are less than 50 employees, the schedule will apply.

Sector or subsectors in accordance with the Standard Industrial Classification
Agriculture [R2 m] R6 m
Mining and Quarrying [R7,5  m] R22,5 m
Manufacturing [R10 m] R30 m
Electricity, Gas and Water [R10 m] R30 m
Construction [R5 m] R15 m
Retail and Motor Trade and Repair Services [R15 m] R45 m
Wholesale Trade, Commercial Agents and Allied Services [R25 m] R75 m
Catering, Accommodation and other Trade [R5 m] R15 m
Transport, Storage and Communications [R10 m] R30 m
Finance and Business Services [R10 m] R30 m
Community, Special and Personal Services [R5 m] R15 m

Whilst the above may no longer apply to some companies if they employ less than 50 employees and turnover may now be less. This may not be the case for B-BBEE Scorecard compliance. The B-BBEE turnover threshold has also been revised, excluding industry-specific-sector codes.

• Exempted Micro Enterprises from R5 million to R10 millionWhilst the above may no longer apply to some companies if they employ less than 50 employees and turnover may now be less. This may not be the case for B-BBEE Scorecard compliance. The B-BBEE turnover threshold has also been revised, excluding industry-specific-sector codes.

• QSE (Qualifying Small Enterprise)from R5-35 million to R10- R50 million
• Generic from R35 million to R50 million

If your company is classified under this business sector and it employs less than 50 employees, you will need to do a voluntary compliance for EEA to comply with the BEE Requirements.

(http://www.saipa.co.za/articles/391726/employment-equity-threshold-increased)

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

Print Friendly, PDF & Email

Salary sacrifice schemes – latest judgment by the supreme court of appeal

Salary sacrifice schemes are popular in practice. Typically, they involve employers paying a decreased salary to their employees, with an added fringe benefit to make up for the lost ‘cost to company’ sacrificed by the employee to obtain the benefit.  For example, an employee may prefer to enter into a salary sacrifice with his/her employer in exchange for being allowed to use an employer provided motor vehicle or accommodation.

From both the employer and employee’s perspective, the income tax and PAYE consequences linked thereto are very often unchanged.  The decreased salary paid by the employer is deductible for income tax purposes as well as such expenditure incurred to provide the benefit to the employee, whilst the employee is subject to income tax on both the decreased cash amount received as a salary as well as the fringe benefit provided by the employer.  The employer is also liable to withhold PAYE as calculated on the total remuneration paid to the employee (which would include both the decreased salary amount as well as the fringe benefit provided).  (See the Seventh Schedule to the Income Tax Act, 58 of 1962.)

The salary sacrifice scheme of Anglo Platinum Management Services (Pty) Ltd recently came under scrutiny.  After having lost in the Tax Court, Anglo Platinum appealed to the Supreme Court of Appeal (Anglo Platinum Management Services (Pty) Ltd v CSARS [2015] ZASCA 180 (30/11/2015)).  In essence, the appeal involved a salary sacrifice scheme implemented by Anglo Platinum whereby it would purchase motor vehicles – selected by its employees – for use by its employees, in exchange for the employees agreeing to a salary sacrifice equal to the value of the benefit.  The vehicles would remain the property of Anglo Platinum until enough has been sacrificed by the respective employees to equate to the purchase amount of the vehicles plus interest calculated thereon.

During this period, Anglo Platinum withheld PAYE on both the salaries paid to its employees, as well as the value of the fringe benefit derived by the employees in using Anglo Platinum’s motor vehicles.  This is hardly contentious, and SARS did not dispute this treatment.  What was in dispute however was whether there really was a salary sacrifice, and whether PAYE should not also have been withheld on the sacrificed amount (and the employees therefore taxed on this amount too).  SARS argued that the scheme, although valid, was incorrectly implemented.  In essence, so the argument went, the employees were still receiving their full salaries, and amounts withheld from their salaries were in essence payments made to the employer to facilitate funding for the acquisition of the vehicles.  SARS cited two main indications in support of this, being that the employees were ostensibly responsible for insurance payments on the vehicles, and that notional accounts with payments, interest and related vehicle expenses were kept:  employees would be responsible to pay any shortfall amounts on these accounts, and similarly be entitled to access any credits available on excess amounts withheld.

The Supreme Court of Appeal upheld Anglo Platinum’s appeal, largely based on the evidence of Anglo Platinum’s Mr Broodryk who testified on behalf of the taxpayer and who devised and implemented the scheme.  It is clear that the court placed great emphasis on the implementation of the scheme to objectively consider whether the scheme in implementation reflected a true salary sacrifice by employees.

The legal matters in the case are not contentious.  At issue is the implementation which is what so often goes awry where tax related advice is concerned.  Our clients should take note of this:  it is not good enough to have a positive tax opinion as regards a proposed structure or transaction.  It is necessary, if not essential, to involve your tax experts in implementation too, be it in salary sacrifice matter, or any other transaction.  Had Anglo Platinum not heeded this principle, the judgment by the Supreme Court of Appeal may very well have gone in SARS’ favor.

This article is a general information sheet and should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

Print Friendly, PDF & Email

Your obligations regarding returns to the Compensation Commissioner

In terms of the Compensation for Occupational Injuries and Diseases Act, No 130 of 1993 (“the Act”), it is required by any employer carrying on a business in South Africa to register as such with the Compensation Commissioner  (“the Commissioner”) for the purposes of occupational injuries and diseases.

This registration is required for each business of the employer separately, but certain types of business are exempt. A business is defined as “any industry, undertaking, trade or occupation or any activity in which any employee is employed”.

Once registered, it is required under this Act that every business must submit annually (usually at the end of March) a Return of Earning labelled the W.AS 8 to the Department of Labour. This return is generated by the Department of Labour and each return is issued with a unique bar code. The return can be submitted by post or electronically via the website of the Department of Labour.

Die Department of Labour then uses the information declared on the W.AS8 return to calculate and issue an assessment to the employer. The employer is assessed at a particular rate applicable to that specific business industry. Once the assessment has been issued to the employer, it must be paid before the due date that appears on the assessment.

The information declared as accurate and correct and signed by both the employer and the agent or payroll administrator on this annual return includes the following:

  • The total amount of remuneration for each month individually that was paid to employees for the current year, as well as the expected total remuneration for each month individually that will be paid for the following twelve months.
  • The average number of employees for each month individually for the current year, as well as the expected average number of employees for each month individually for the next twelve months.

All information relating to earnings and staff costs must be kept for at least four years. It is a criminal offence to misrepresent any of the facts and information declared on the annual return.

Problems that have been experienced by employers recently regarding the above procedures include the following:

  • Returns have not been issued or issued on time to employers:

For the last couple of years it has been the experience of some employers and their representatives that the W.AS8 Return of Earning has not been issued to them in time to complete and submit it, or in fact is has not been issued at all.

  • Assessments based on the W.AS8 Return of Earnings have not been issued:

Many employers have waited considerable time for their assessments to be issued to them for payment.

  • Assessments have been calculated at the incorrect rate for the employer’s industry:

In many instances it was found that incorrect rates for the specific business industry were used to calculate the assessed amount to be paid by employers. In some instances this led to significant variances between the correct amount to be paid and the incorrect amount calculated by the Department of Labour.

  • Objections on incorrect assessments are not being processed:

Many employers have raised objections against their incorrect assessments. Some of these objections have not been processed, while the Department of Labour still demands payment of the incorrect assessed amounts.

Auditors and accountants are very capable to assist employers in following the correct procedure to submit their returns, review the assessments for correctness and solve problems relating to the W.AS8 Return of Earnings.

This article is a general information sheet and should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

Print Friendly, PDF & Email