People who benefit from residential accommodation allowances could pay much more tax if certain legislative amendments come into effect.
The new laws, which will force employers who pay rental allowances to tax their employees on the full amount of the allowance, were due to be passed last year.
But tax experts say the Receiver of Revenue agreed to a year's grace to allow for further discussions on the matter and to enable employers and employees to prepare for the change.
They say last year's proposals were full of anomalies and inequities and that a huge outcry over the matter prompted the Department of Inland Revenue to set up a sub-committee to discuss the proposed changes. Various interested parties including the Chamber of Mines, the South African Chamber of Business (Sacob) and agricultural unions are represented on the sub-committee..
The South African Revenue Services has indicated what sort of draft legislation it has in mind and once the sub committee has discussed it, the proposed legislation will be presented to the Minister of Finance.
After ministerial approval, all interested parties will again have an opportunity to comment on the draft legislation.
Colin Wolfsohn, tax partner at Kessel Feinstein chartered accountants, says there is a lot of uncertainty about what form the legislation will take and the matter has now been referred to Parliament's Standing Committee on Finance.
"We are not certain whether the original proposals will be implemented or not.
"If legislation along the lines of last year's proposals comes into effect, it will severely affect a lot of people ? particularly lower income groups who benefit from rental contributions from their employers."
The taxable value of rental contributions are presently calculated differently for different people, he says. It mostly depends on two things:
* Net income, exclusive of allowances; and
* The amount of the rental contribution.
Wolfsohn says an employee whose company contributes R2 000 towards his rental may currently be taxed on, for example, only R200.
At a marginal tax rate of 35 percent, this means the employee pays R70 in tax towards his rental allowance.
Should the new law be enforced, the same employee will be taxed on the full R2 000 which will work out to about R700. This will be an increase in tax of R630 a month.
Taken over a full year, it will mean a difference of about R7 500 in taxes paid by this employee.
Wolfsohn says the proposed legislation is in line with the Receiver of Revenue's objective to remove allowances and perks because these are often abused and used to avoid tax.
He says Trevor Manuel, the Finance Minister, said last year the purpose of the amendments was to:
* Remedy the abuse where employees effectively owned their houses through trusts in which their parents or non-immediate family members were beneficiaries;
* Tax all employees on the cash value of their salaries; and
* Generate additional revenue from employees in high income brackets who made use of the fringe benefit legislation to achieve lower effective rates of taxation.
According to Wolfsohn the outcry over a number of anomalies and inequities in the proposed legislation prompted the minister to agree to postpone the matter for a year and to revisit it in this year's Budget.
"The proposed legislation will particularly affect middle to lower income households, because the cost of their accommodation normally consumes a greater portion of their income than that of high income households."
Wolfsohn says over the last 17 years the tax burden of a large number of lower income households has trebled, mainly due to fiscal drag.
Should the proposed legislative amendments be introduced in this year's Budget speech, Wolfsohn says it will have a material negative effect on a number of employees in that their take home pay will be reduced by about 10 to 25 percent.
He suggests that, if the Minister is intent on introducing the proposed legislation, it should be phased in over five years.