Nwanda internal news (January)

1. Staff Exam Results: Congratulations to the following employees:

CTA Student:

  • Erika van Eck has passed CTA level 2 and has written Board I. We wish her the best of luck for her results.

Obtaining their BCompt(Acc):

  • Anneriska van Loggerenberg
  • Suzette Silva dos Reis
  • Andre de Klerk

Undergrad Students – 2 or more distinctions:

  • Sadiya Mansoor
  • Roxy Lorincz
  • Daniel Adlam

2. Completion of Training Contract (Articles)

Congratulations to Suzette Silva dos Reis and Anneriska van Loggerenberg on their successful completion of their training contracts.

3. New faces: Trainee accountants

We are delighted to announce the appointment of the following new trainee accountants:

From the left: Danielle Fynn; Chante-Liz Coetzer;  Zander Lottering; Hennie de Beer; Denise Jubelius; Nhlanhla Ngwasha ; Saafiyah Ahmed Bashir ; Raymond Prinsloo and Andre Strydom

B_Trainee accountants

4. Resigned Employees:

  • Jonathan Cohen, Lebohang Semeno and Gordon Tricker have resigned, we wish them the best in their future endeavors.

5. Annual Tax Update Seminar:

We will be hosting our annual tax seminar, the date will be communicated in due course.

6. Congratulations to Alisha Potgieter on her engagement!

7. Facebook Page:

Go and have a look and Facebook-Like-ButtonLIKE.

To all readers, like our facebook page and if you are the 100th person you get R250!!

Just a spoonful of sugar to help the medicine go down

4BAs from the 2013 tax year contributions to medical aid schemes are no longer allowed as a deduction.  This provision was replaced by the section 6A Medical scheme fees tax credit.  Instead of allowing contributions as a deduction from taxable income, the credit is deducted from taxpayer’s liability for normal tax.  The credit is in the nature of a rebate, rather than a deduction.

 

For the year of assessment ending 28 February 2014 the amount of the credit is equal to:

R242 per month in respect of benefits to the taxpayer
R242 per month in respect of benefits to the first dependant
R162 per month in respect of every additional dependant

For a family of four the total rebate will be R808 per month.  It is a requirement that the contributions are actually paid and not only payable.  Contributions paid by an employer and taxed as a fringe benefit will be regarded as having been paid by the employee.

For the current year of assessment the deduction of medical expenses in addition to scheme contributions, is dealt with in terms of section 18 of the Act.  With effect from 1 March 2014 this provision is repealed and replaced with the section 6B Additional expenses medical tax credit.  The definition of “qualifying medical expenditure” for purposes of calculating this rebate is identical to the wording of the deleted section 18 and includes amounts paid to registered medical professionals, nursing homes and hospitals, and for prescribed medicines.  Once again it is a requirement that the expenses were actually paid.

Amounts recoverable from the medical scheme are not taken into account.  Expenditure necessarily incurred and paid in consequence of any physical impairment or disability suffered by the taxpayer or any dependant, is also taken into account as qualifying expenditure.  The definition of “disability” remains unchanged.

If the taxpayer or one of his dependants is a person with a disability as defined, or aged 65 years or older, the rebate is calculated as follows: 33.3% of the amount by which the actual medical scheme contributions exceed three times the section 6A medical scheme fees tax credit, as well as 33.3% of the qualifying medical expenses paid by the person.

Example 1

A family of four includes a person with a disability.  The taxpayer’s contributions to the medical scheme for the year of assessment is R48 000.  He also paid qualifying medical expenses of R12 000 and expenditure in consequence of the disability amounted to R24 000.

Section 6A rebate x 3 = R29 088
(R48 000 –R29 088) x 33.3% = R6 298
(R12 000 + R24 000) x 33.3% = R11 988

In addition to his section 6A rebate of R9 696, the taxpayer is allowed a section 6B rebate of R18 286 (R6 298 in respect of contributions and R11 988 in respect of qualifying expenses).

The basis for calculating the rebate in all other cases is completely different and best illustrated by way of an example.

Example 2

The taxpayer has a wife and two children.  He paid medical fund contributions of R48 000 and qualifying medical expenses of R24 000 during the year of assessment.  His taxable income for the year is R240 000.

In calculating the rebate, all qualifying expenditure is taken into account.  The actual contributions to the medical scheme are reduced by an amount equal to four times the section 6A rebate.

Qualifying expenditure:                      R24 000
Contributions:                                     R48 000 – (R9 696 x 4) = R9 216

The rebate is limited to 25% of so much of the aggregate of the two amounts calculated above as exceeds 7.5% of the person’s taxable income.

Rebate = [(R24 000 + R9 216) – (R240 000 x 7.5%)] x 25%
[R33 216 – R18 000] x 25%
R3 804

Thus, in addition to his section 6A rebate of R9 696 the taxpayer is entitled to a section 6B rebate of R3 804.

As the second rebate is calculated with reference to the person’s taxable income, lower income taxpayers benefit more.  Had the person’s taxable income in the above example been R442 880 or higher, he would not have received any rebate at all.

Whether the new system is simpler or more efficient is debatable.  The uniform rebate in respect of contributions will presumably ease SARS’s administrative burden.  From the taxpayer’s perspective however, the requirements regarding record-keeping and proof of expenditure remain the same.  For high income earners it may however not be worth the effort, as they will most likely not qualify for the second rebate.

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.

Standard acknowledgements of debt and the National Credit Act (NCA)

2BThe new NCA not only regulates instalment sale agreements and lease agreements in respect of movables as was done by its predecessor,  the repealed Credit Agreements Act 75 0f 1980. The NCA applies to a much wider variety of credit agreements and has no monetary cap.  Instead of instituting legal action a creditor often gets a debtor to sign an acknowledgement of debt to facilitate repayment.This document could contain a provision for instalments and interest and fees. The question arises whether this agreement in confirmation of an existing obligation constitutes a credit agreement for purposes of the NCA.

The purpose of this Act is to promote and advance the social and economic welfare of South Africans, promote a fair, transparent, competitive, sustainable, responsible, efficient, effective and accessible credit market and industry, and to protect consumers.

“Credit”, when used as a noun, is defined in the Act as a deferral of payment of money owed to a person or a promise to defer such payment; or a promise to advance or pay money to or at the direction of another person.

“Agreement” includes an arrangement or understanding between or among two or more parties which purports to establish a relationship in law between those parties.

The parties to a credit agreement governed by the NCA are referred to as the “consumer” and the “credit provider” and these definitions should be considered. An acknowledgement of debt normally refers to a historical event of cause and does not constitute a credit guarantee or any of the named credit transactions such as a pawn agreement, discount agreement, incidental credit agreement, instalment agreement, lease, secured loan or mortgage agreement or credit facility.

However, the fact that it contains a deferral of payment and requires the payment of interest, fees and other charges, will cause it to fall within the ambit of the catch-all term “credit transaction” provided for in Section 8(4)(f) of the Act.

Section 2(1) provides that the Act must be interpreted in a manner that gives effect to the purposes set out in Section 3. The question really is whether the legislature intended the rearrangement or the repayment terms of an existing debt,  for instance where money has already been advanced to a consumer a considerable period of time ago or where damages were suffered as a result of a delict or breach of contract, to constitute a credit agreement or transaction for purposes of the NCA.

Due to the elements of deferral and the charging of interest, fees and other charges in a standard acknowledgement of debt, and in the absence of any express or implicit indication to the contrary, it seems an inescapable conclusion that the agreement could be defined as a credit agreement within the meaning of the NCA. The relevance of this is that it might be that the credit provider would be required to register as such with the National Credit Regulator, affordability assessment would have to be done prior to conclusion, the consumer could become overindebted and apply for debt review, and many other onerous requirements will be applicable.

It is submitted that where the cause of action in relation to which the acknowledgement of debt was entered into is based on a contract or agreement which constitutes a credit agreement, the insertion of a no-novation clause into an acknowledgement of debt will not serve to exclude the agreement subsequently concluded, from the ambit of the NCA.

However, where the debt initially arose as a result of a delict, the insertion of a no-novation clause might have the effect of preserving the original cause of action, namely the delict, and thus cause the matter to fall outside the scope of the NCA.

One thing to be kept in mind is that a “consumer”, in respect of a credit agreement to which the NCA applies, means

  1. the party to whom goods or services are sold under a discount transaction, incidental credit agreement or instalment agreement;
  2. the party to whom money is paid, or credit granted, under a pawn transaction;
  3. the party to whom credit is granted under a credit facility;
  4. the mortgagor under a mortgage agreement;
  5. the borrower under a secured loan;
  6. the lessee under a lease;
  7. the guarantor under a credit guarantee; or
  8. the party to whom or at whose direction money is advanced or credit granted under any other credit agreement.

This definition might provide the answer as the acknowledgement of debt might, as a different cause of action, not qualify the consumer under the above definition.

So, too, is the underlying cause of action to the acknowledgement of debt, and it deserves no debate that signing an acknowledgement of debt is not something to go about without due consideration.

Should a court be convinced that the written acknowledgment of debt is subject to the NCA the court could be required to make a ruling in terms of Section 130(4)(b) of the NCA, which states:

In any proceedings contemplated in this section, if the court determines that – … the credit provider has not complied with the relevant provisions of this Act, as contemplated in subsection (3)(a), or has approached the court in circumstances contemplated in subsection (3)(c) the court must – adjourn the matter before it; and make an appropriate order setting out the steps the credit provider must complete before the matter may be resumed.

In Adams v SA Motor Industry Employers Association 1981 (3) SA 1189 (A) at 1198 – 1199, the court held that there is a presumption against novation and that, where novation was not intended, it was possible for two obligations to co-exist. These obligations would be interdependent, and the creditor does not have a free election to enforce the original obligation.

An acknowledgment of debt, sometimes referred to as an IOU, is evidence of a debt which is due, but differs from a promissory note as it does not contain an express promise to pay. However, where the acknowledgment of debt is coupled with an undertaking to pay, it will give rise to an obligation in terms of that undertaking.

The case of Rodel Financial Service (Pty) Ltd v Naidoo and Another 2013 (3) Sa 151 (Kzp), and its annotations is recommended for reading and getting a better understanding of the applicable principles.

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.

POPI Act

3BThe Protection of Personal Information Bill, which will soon become law and is commonly referred to as POPI, seeks to regulate the processing of personal information. It must be read with other relevant statutes such as:

  • ELECTRONIC COMMUNICATIONS AND TRANSACTIONS Act 25 of 2002 (‘ECT’);
  • PROMOTION OF ACCESS TO INFORMATION Act 2 of 2002 (‘PAIA’);
    REGULATION OF INTERCEPTION OF COMMUNICATIONS Act 70 of 2002 (‘RICA’);
  • CONSUMER PROTECTION Act 68 of 2008 (‘CPA’).

Personal information of both employees and clients is – given e-commerce and technology used in connecting businesses – becoming instantly accessible to third parties.

POPI aims to introduce certain protection principles to establish minimum requirements for the processing of personal information. There are eight information protection principles contained in chapter 3 of the Bill, namely:

Accountability; Processing limitation; Purpose specification; Further processing limitation; Information quality; Openness; Security safeguards; Data subject participation.

The intention is to promote transparency with regard to what information is collected and how it is to be processed. This might be the end of all those unsolicited sales calls and spam we receive on a daily basis.

Processing means broadly anything done with personal information, including collection, usage, storage, dissemination, modification or destruction (whether such processing is automated or not).

POPI compliance involves capturing the minimum required data, ensuring accuracy, and removing data that is no longer required. These measures are likely to improve the overall reliability of the organisation’s databases.

Compliance further demands identifying personal information and taking reasonable measures to protect the data, like tracking the workflow of client documents and ensuring that vital information is not misplaced or falls into the wrong hands.

The POPI Act is very much in line with similar legislation that exists in about 70 to 80 other countries, and South Africa is finally set to fall in line with international standards for the collection and handling of personal information.

The Act does not only protect the way in which information is used and/or re-used by the recipients of the information, but the party gathering the information also has the responsibility to ensure it is accurate, current and not misleading.

Personal Information may only be processed if voluntary, specific and informed consent is obtained.

An Information Protection Regulator will be appointed who will have broad powers and may consider the public interest as opposed to an individual’s rights to privacy.

There are, however, cases where POPI does not apply. Section 4 Exclusions include:

  1. purely household or personal activity;
  2. sufficiently de-identified information;
  3. some state functions including criminal prosecutions, national security etc.;
  4. journalism under a code of ethics;
  5. judiciary functions etc.

Source Reference:

http://www.popi-compliance.co.za/
http://www.saaci.co.za/

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.

Tax ombud: Recourse for aggrieved taxpayers

1BThe Tax Administration Act that came into effect on 1 October 2012 is a valiant attempt to balance the rights of the taxman with those of the taxpayer.  One of the ways of bolstering the taxpayer’s position on this not very level playing field is the creation of the office of the ombudsman or Tax Ombud.

Exactly one year after the inception of the Act, Gauteng Judge President Ngoepe was appointed as the first incumbent of this office.  The mandate of the Ombud is set out in section 16(1) of the Act:

…to review and address any complaint by a taxpayer regarding a service matter or a procedural or administrative matter arising from the application of a tax Act.

The aim is to provide taxpayers with a low-cost mechanism to address administrative difficulties that cannot be resolved by SARS.  The Ombud’s powers are however limited.  He may not review legislation or policy unless it relates to a service, procedural or administrative matter.  Although the Act is not clear on the issue, the decision as to whether a matter falls within the scope of his mandate probably lies with the Ombud himself.

What is clear is that a complainant is required to first exhaust the available complaint resolution mechanisms within SARS before approaching the office of the Ombud, unless there are compelling circumstances for not doing so.  This will, for instance, be the case where exhausting internal mechanisms will cause undue hardship to the taxpayer, or is not likely to produce a result within a reasonable period of time.

Complaints are to be made in writing on the prescribed form to the office of the Ombud.  A copy of the complaint form can be requested from the Ombud’s office by telephone, fax or email.  The form must be completed and signed by the taxpayer.  If a tax practitioner or other person completes and signs the form on behalf of the taxpayer it is advisable for the client to complete a power of attorney specifically for this purpose.  All supporting documents must be attached to the form.  A request for review of the complaint should include any correspondence received or sent relating to the complaint, call reference numbers, and the relevant contact details of the SARS officials with whom the taxpayer dealt.  It is recommended that the complainant specifically indicates which internal remedies were pursued and what SARS’s response thereto was.

If a taxpayer is unsure as to whether or not his complaint falls within the Ombud’s mandate, or if a taxpayer is unable to write his complaint, he may call the Ombud’s office where trained professional staff will attend to the call and advise him accordingly.

The Ombud may review and address a complaint in a number of ways, including by way of mediation or conciliation.  He may also facilitate a taxpayer’s access to complaint resolution mechanisms within SARS.  Ultimately he must follow informal, fair and cost-effective procedures in resolving a complaint.

The Ombud’s recommendations regarding the resolution of a matter are not binding on SARS.  In the interests of legitimacy and transparency it is however likely that SARS will follow these recommendations.

Reports by the Ombud to the Minister of Finance must be submitted on an annual basis.  In addition, he must also report to the Commissioner of SARS at quarterly intervals.  This report must contain recommendations for such administrative action as may be appropriate to resolve the problems encountered by taxpayers.

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.