PAYROLL NOTIFICATION (2016)
Please see the below guidelines for your attention and adherence:
New Personal Income Tax (PAYE) Threshold
Effective July 1, 2016 section 30 of the Income tax Act will be amended resulting in the personal income tax threshold being increased from $592,800 to $1,000,272.
The increase will result in an effective annual threshold of $796,536 for the 2016 calendar year computed as follows:
January 1, 2016toJune 30, 2016 Threshold $592,800 ÷ 12 x 6 $296,400
July 1, 2016 to December 31, 2016 Threshold $1,000,272÷12 x 6 $500,136
Total Threshold for Year of Assessment 2016 $796,536
With this increase in the threshold with an effective date of July 1, 2016, individuals earning up to the below listed amounts will, as of July 1, 2016, be subject to a personal income tax rate of zero percent (0%).
$500,136 ÷ 6……………………………………………. $83,356 monthly
$500,136 ÷ 13………………………………………….. $38,472 fortnightly
$500,136 ÷ 26………………………………………….. $19,236 weekly
The periodic amounts listed above would still be subjected to the adding back of National Insurance and Pension amounts that may have been deducted.
Individuals who have already earned in excess of $592,800 but less than $796,536, for the 2016 calendar year, from which personal income tax was deducted, may have the taxes deducted refunded by their employers.
New Personal Income Tax Rate for individuals earning income above $500,000.00 monthly
Effective July 1, 2016, there will be an increase by five percent (5%) in the personal income tax rate for individuals earning in excess of $6,000,000.00 annually. This will result in a personal income tax rate of thirty percent (30%) being chargeable on income earned in excess of $6,000,000.00. The table below gives a breakdown of the new threshold and income tax rate structure.
|
Statutory Income $ |
New rate of tax % |
|
0 – 796,536 |
0% |
|
796,537 – 6,000,000 |
25% |
|
6,000,001 and above |
30% |
Payroll administrators need to be mindful that the amount of $500,000.00 monthly is still subject to allowable deductibles. As such the minimum monthly gross taxable salary that has to be earned by an individual for that individual to be charged income tax in the thirty percent (30%) band is $586,431.00 for the 2016 calendar year. This monthly amount of $586,431.00 assumes that the only deductible applicable is National Insurance. If the individual has pension deductions, the amount earned would have to be greater than $586,431.00 for the individual to be charged income tax in the thirty percent (30%) band.