How will the annual limit be applied to employees employed for a portion of the tax year?
If an employee terminates after 3 months he/she will only be entitled to a maximum deduction of 3/12 x R350 000.00 provided the amount does not exceed 27.5% of the remuneration received during the 3 months. SAP has chosen the conservative approach for utilising the monetary cap.
For the purposes of calculating the monthly limit, the remuneration will be annualised. The annualised amount will then be used to calculate the annual limit and this amount is then de-annualised to calculate the maximum allowable deduction for the active period. The amounts allowed as a deduction during the previous months of the tax year will be deducted from this amount to determine the maximum allowable deduction for the current payroll period.