National Treasury seeks to empower low-income employees

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Wesley Grimm | Associate | Webber Wentzel | mail me |


 

 

 

 


Nirvasha Singh | Partner | Webber Wentzel | mail me |


National Treasury’s proposal in the draft 2018 Taxation Laws Amendment Bill (2018 draft TLAB) to remove the taxable benefit concerning low or interest free loans granted to low-income employees for low-cost housing (the Proposed Amendment) was discussed on Day 2 of the recent National Treasury Workshop on the 2018 draft TLAB (Tax Workshop).

Currently, if an employer provides a low or interest free loan to an employee for the acquisition of a low-cost house (i.e. a house valued at less than R450,000) instead of solely providing low-cost housing to a low-income earning employee (i.e. an employee earning less than R250,000 remuneration per annum), the low or interest free loan will be regarded as a taxable benefit in the hands of that low-income earning employee.

National Treasury confirmed the Proposed Amendment at the Tax Workshop and stated that the relief from triggering a taxable benefit will be extended to apply to a low or interest free loan provided by an employer to an employee with a value not exceeding R450,000 provided that the loan is granted for the acquisition of residential accommodation and not merely immovable property.

National Treasury also reiterated Government’s policy intention at the Tax Workshop, stating that this proposed amendment is intended to encourage employers to empower their low-income earning employees through homeownership. Given that the Proposal is specifically targeted at low-income earning employees, the market value threshold of the residential accommodation will therefore be retained.

Although there is scope for further refinement in future legislative cycles, we welcome the Proposed Amendment and support National Treasury’s policy intent in this regard.

We anticipate that when the Proposed Amendment comes into operation on 1 March 2019, a number of employees caught in the ‘no-man’s land’ between not qualifying for government funded housing, or being eligible for bank loans, will finally receive welcome assistance from their employers and become empowered homeowners for the first time.


 

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