More tax-free income for some come January 1
THE final increase in the tax threshold will come into effect January 1 and will result in more tax-free income for some workers.
With the January 1 increase, employees will benefit from additional tax free income of $10,036 monthly, $4,632 fortnightly, or $2,316 weekly.
Minister of Finance and the Public Service announced during his budget presentation in April this year that the income tax threshold would be increased in two tranches, giving some employees a respite from the deductions from their salary.
The first increase happened on July 1, when the figure was increased to $320,000. The second adjustment on January 1, 2010, will see individuals benefiting from a tax-free income of $441,168 annually, according to the Tax Administration Department. The effective annual increase is $270,504, up from the previous $196,872 mark in 2008.
“The increase applies to all individuals whether employed, self employed or pensioners. As an individual you are entitled to a tax free portion of your income,” Meris Haughton, Director, Communication, Tax Administration Services Department told Caribbean Business Report.
While Haughton could not give a figure for the number of persons who will benefit from the increase, Shaw noted last year that the increase will result in 132,000 PAYE workers no longer paying income tax.
“With an increase in the threshold it means that persons will have more money in their pockets. They will now be paying over less in taxes by virtue of the increase in the threshold”, Haughton said. “Employers are being reminded to make the necessary adjustments to their payroll system to reflect the increase in the threshold, so that their employees may benefit from the increase,” she added.
Self-employed individuals must file estimated returns for the current year to the Taxpayer Audit and Assessment Department and make payments of their estimated tax liability in four equal installments, in order to benefit from the increased tax threshold. However, those who have already filed returns will be allowed to file amended returns and claim the additional threshold amount for the last two quarters of 2008, resulting in an additional $12,558 in income.
Pensioners will also see a reduction in taxable income. The new threshold for pensioners age 55 to 65 will be $400,000, and for those over 65 up to $480,000.
“We send out advisories to the business community, particularly to employers to advise them to increase the threshold to ensure an increase in benefit for their employees,” Haughton said. She said the department sent out advisories to companies at the start of December.
“We do payroll audits to establish whether or not employees are getting the increased benefits from the tax threshold. In addition because so many persons are aware of the increase they look for it in their net pay,” Haughton said.
However, tax audits are not automatic and are done as a result of random sampling, or if there appears to be a problem with the tax compliance of the company, whether as a result of employee complaints or other ‘red flags’, Haugton explained.