- Do you know / understand ETI (Employement Tax Incentive)?
- Did you know that there is a 24 month limit per employee for claiming ETI?
- Are you printing your monthly ETI Report to keep tabs on who has qualified for how many months?
- Have you ticked the 'Apply 2nd Year ETI Calculations' Box in Pastel Payroll once an employee has qualified for 12 months?
Let's have a look at all the above questions and explain the Employment Tax Incentive:
What is ETI?
It is an incentive aimed at encouraging employers to hire young and less experienced work seekers. ... The employer can claim the ETI and reduce the amount of Pay-As-You-Earn (PAYE) tax payable by the amount of the total ETI calculated in respect of all qualifying employees.
Can I Claim ETI?
The employer is eligible to claim the ETI if the employer–
- Is registered for Employees’ Tax (PAYE), or must be eligible to register for PAYE (e.g. the employer can't register just to claim ETI, other registration requirements must be met)
- Is not disqualified by the Minister of Finance due to the displacement of an employee or by not meeting the conditions as may be prescribed by the Minister by regulation.
- A Local, Provincial or National Government - for more details Click Here
- Public Entity (listed in Schedule 2 or 3 to the Public Finance Management Act) Municipal Entity
When will ETI incentive claims not be allowed?
An employer is not allowed to reduce the PAYE payable in respect of a month if the employer, on the last day of the month,
- failed to submit any return or
- has any tax debt outstanding except if
- an agreement has been concluded for a deferral payment,
- an agreement has been concluded for compromise of a tax debt,
- a tax debt has been suspended pending an objection or appeal, or
- the tax debt is less than R100.
If the employer is not tax compliant, can the incentive amount be rolled over to the following month?
Yes. The employer just needs to keep track of the rolled-over amount. Unfortunately Sage Pastel Payroll cannot keep record of the rolled over amount and will have to be done separately on an Excel spreadsheet. For More information or help with this, contact your Pastel Payroll Consultant.
What happens if your ETI amount is greater than your PAYE amount for a certain month?
The excess amount can be rolled forward to the following month up until the end of the reconciliation period (August and February). The excess amount just needs to be recorded.
How do I know which employees are Qualifying Employees?
The employee will qualify if he/she:
- is between 18-29 years of age
- is in possession of a SA ID (13 digits), a valid asylum seeker permit or an ID in terms of Section 30 of the Refugees Act
- is employed on or after 1 October 2013
- earns at least the minimum wage according to the Bargaining Council, Collective Agreement or Sectoral Determination. If none is applicable, then the employee should earn at least R2 000 for a full month (160 employed hours).
The Employee will not qualify if he / she:
- is a domestic worker
- is a “connected person” to the employer or
- earns remuneration of R6 000 or more during the month
- has qualified for ETI for more than 24months
Click Here for an Easy Test on SARS website to work out if an employee qualifies for ETI.
How to Set-up and Monitor ETI in Sage Pastel Payroll
Click Here to Download a step by step guide with screen shots.
Click Here to watch a Video that explains ETI
* Article written with the help of content from SARS & Sage Pastel Payroll