Pastel Partner Payroll & HR
FAQ
2013 Update 1
FAQ:
Gross Retirement Funding Income
What is Retirement Funding Income (RFI)?
• Retirement Funding Income is the total amount of taxable earnings (includes income and fringe benefits) used in
the calculation of retirement fund contributions.
• Retirement Fund Contributions include all contributions made by an employee and the employer towards a
pension/provident fund (NOTE – retirement annuity funds are excluded).
RETIREMENT FUNDING INCOME = all income and fringe benefit amounts
amounts used in the calculation of a
pension/provident fund contribution.
contribution.
EXAMPLE: The pension/provident fund rules state that the monthly contribution should be calculated as 7.5% of
basic salary, bonuses and overtime.
This means that the amounts paid as basic salary, bonuses and overtime must be defined as Retirement Funding
Income and reported on the tax certificate against code 3697.
Why is it so important to define the value of Retirement Funding Income?
When SARS calculates the individual’s tax liability on assessment, they need to determine how much of the
taxpayer’s pension fund contribution may be allowed as a tax deduction. The rule states that generally, 7.5% of
Retirement Funding Income will be tax deductible.
deductible
What is Non-Retirement Funding Income (NRFI)?
• Non-Retirement Funding Income is the total amount of taxable earnings (includes income and fringe benefits) NOT
used in the calculation of retirement fund contributions.
• Retirement Fund Contributions include all contributions made by an employee and the employer towards a
pension/provident fund (NOTE – retirement annuity funds are excluded).
• If an employee is not a member of a pension/provident fund or only contributes towards a retirement annuity fund,
all taxable earnings will be defined as non-retirement funding income.
NONNON-RETIREMENT FUNDING INCOME = all income and fringe benefit amounts
amounts NOT used in the
calculation of a pension/provident fund contribution
contribution.
ibution.
EXAMPLE: The pension/provident fund rules state that the monthly contribution should be calculated as 7.5% of
basic salary, bonuses and overtime. The employee also has medical aid contributions paid by the employer and
receives a travel allowance.
This means that the amounts paid as basic salary, bonuses and overtime must be defined as Retirement Funding
Income and reported on the tax certificate against code 3697.
The rest of the earnings, the medical aid fringe benefit and travel allowance, will be defined as Non-Retirement
Funding Income and reported on the tax certificate against code 3698.
Why is it so important to define the value of Non-Retirement Funding Income?
When SARS calculates the individual’s tax liability on assessment, they need to determine how much of the
taxpayer’s retirement annuity contributions may be allowed as a tax deduction. The rule states that generally, 15%
15%
of NonNon-Retirement Funding Income will be tax deductible.
deductible.
How will the RFI and NRFI requirements affect Pastel Payroll?
• Access Utility…System Status and make sure that the number of Processed Employees are zero. If your
employees are Processed you will not be able to complete the setup of RFI and NRFI. Process a Pay Period
Update into Year End first before you continue.
• View the IRP5/IT3(a) Exceptions Report. You will notice the following exceptions listed at the bottom of the report:
• Here all taxable income and fringe benefits not yet specified as either RFI or NRFI will be listed.
• Close the report to complete the RFI and NRFI setup. If you have no Processed employees as indicated above, the
following message will display:
• Select Yes to complete the RFI/NRFI setup.
Pastel Payroll lists all the relevant transactions on your exceptions report with the RFI/Non-RFI option next to each
transaction. Select the relevant classification for each transaction and Save.