A guide to personal income tax

08 Oct 2021

Who has to pay income tax?

If you are under the age of 65 and you earn more than R87 300 per year, you will have to pay income tax. For persons over the age of 65 the threshold is R135 150, and over 75 it is R151 000.

What is an IRP5?

An IRP5 tax certificate is a form that your employer gives to both you and the South African Revenue Service. SARS is the department in government that is responsible for collecting tax.

On the IRP5 form, your employer confirms how much you earn; what expenses you might be paying; as well as the amount of tax you pay. Your IRP5 is proof of the tax that has been deducted from your income and paid over to SARS.

It is also a good idea to make sure that your IRP5 matches your payslips. Check that the amounts shown on the IRP5 are the same as those on your payslips for the months recorded.

Why do we pay tax?

Tax is what gives the government the funds to pay for every government service – such as education, health, social grants and welfare, the police service, roads and the defence force etc.

Who decides how much tax I pay?

In short – the government. Every year when the budget is presented in parliament, the new tax tables are approved. The tax tables state the amount of tax each person must pay according to how much they earn. These amounts are then added to The Income Tax Act – this is the law in South Africa that makes the rules about tax.

When should a tax return be submitted?

A tax return is an old-fashioned term for a tax form. This is a form that you fill out and submit to SARS. On the form, you write down all your details so that SARS can make sure that you have paid, or will pay, the correct amount of tax.

Any tax year for personal income tax runs from the 1 March to 28 February the next year. It is currently the 2022 tax year. This runs from 1 March 2021 to 28 February 2022.

If you need to pay income tax, you can start submitting your tax forms from 1 July until 23 November this year via eFiling, for the 2021 tax tear – the period from 1 March 2020 to 28 February 2021.

What you must remember:

  • Even if you were not employed for the full tax year, or if you worked for more than one employer, a tax return MUST be submitted.
  • If you are paying towards a retirement annuity fund, you should submit a tax return.
  • If you earn income from more than one source, a tax return MUST be submitted.
  • If you belong to a medical aid for which your employer does not pay directly through your payroll, it would be beneficial for you to submit a tax return.

You must try and keep to the deadlines for submission. However, if you are in arrears, you can and should still submit at any time.

If you are liquidated, you can submit to SARS at any time during a tax year.

Also, if a person dies, then, as part of winding up their estate, you can also submit a tax return at any time.

SARS issues penalties for late submission of tax returns. This means they will make you pay extra money if your tax return was late. The amount they will charge you starts at R250 per month, per tax return, for every tax year for which you did not submit a return.

What is a deduction?

A deduction is an amount that SARS allows a taxpayer to pay from his/her income, before calculating the amount of tax that you must pay for a tax year. A deduction makes the amount of a person’s taxable income less. This makes the amount of tax you must pay, less. The deduction is only for certain special kinds of payments. An example of this is when you are paying retirement annuity contributions: If you earn R10 000 per month, and contribute R500 to a retirement annuity, you will be taxed on R9500, instead of your full salary.

Contact Legal&Tax Services if you want help in finding out what other deductions are not taxable.

What is a rebate?

A rebate is a discount on the tax payable for a particular tax year. While a deduction is an amount that is taken away BEFORE working out the tax to be paid from your income, a rebate is a discount that might be given to you WHEN working out what tax you must pay.

The primary rebate allocated to every taxpayer is R15 714 for the 2022 tax year. Additional rebates apply to people older than 65 and 75 – that is why the threshold at which they become liable for tax is higher. Usually this rebate is already calculated on a monthly basis by your employer and so should not affect your final income tax submission.

The second rebate concerns medical costs. Any person who belongs to a medical aid receives a tax rebate. For the 2022 tax year this rebate is R332 per person for the first two members, and R224 for every additional member thereafter, on a monthly basis.

If you have had to pay medical expenses that your medical aid did not cover, then you might get an extra rebate. However, this depends on how much money you had to spend. The extra medical expenses that you had to pay must have added up to more than 7.5% of your income, in order to make a difference to the tax you must pay.

Contact Legal&Tax Services if you want help in finding out about whether you qualify for any rebates.

Can I claim my tax back?

The concept of claiming tax back is incorrect and confusing. You cannot get back the tax you owe SARS. However, if at some point, paid in too much tax, then you may receive a refund, where SARS will return this money to you.

If you were only employed for part of the tax year, there is also a chance that you may get a tax refund.

What must I do if I am audited by SARS after submitting my tax return?

After you submit your tax form, you might be contacted by SARS and asked to provide documents that prove that the details you wrote down on your form are correct. If this happens to you, it means that you are being audited.

You my need to send SARS documents, like your medical aid tax certificate, or proof of expenses that you had while doing your job.

The easiest way to send in these documents is via eFiling on the SARS website. That is unless you are a Legal Prestige or Legal Prestige+ member, in which case we will handle your tax submission for you.

If the information on the documents that you send in, is the same as the information you wrote down on your tax form, then there will be no problem. However, it is a crime to write down false information on your tax form – so do not ever do this.

If SARS owes you a refund, but you are then audited, you will only get this money after SARS finishes checking whether your tax information is correct.

What if I owe SARS money?

A payroll system is the computer program that an employer uses to work out the different salaries of all the people who work for them. The payroll systems that most employers use to pay salaries are very accurate. Therefore, if you are told that you owe money to SARS, you should ask for SARS to explain to you exactly why.

However, if you are earning extra money, from something other than your salary, this might mean you do owe SARS more money. Examples of this are if you are given a travel allowance, or earn income from more than one source, such as a deceased spouse’s pension fund.

If you find yourself having being told that you owe money to SARS and you do not understand why, contact Legal&Tax immediately. You only have 30 days to dispute an assessment issued by SARS. This is a process through which you ask SARS to recheck and then explain why they have asked you to pay in more money.

How do I know the tax deducted from my salary is correct?

Payroll systems work out your tax based on the latest tax tables. These computer programs are also able to work out differences in how tax is applied to different kinds of income, such as that for a salary compared to a travel allowance.

You have a right to ask your employer to go through your payslip and explain to you all the different amounts that are listed.

With Legal&Tax you’re not alone

Legal&Tax is your companion and an expert in all tax matters. We offer advice, tax registration, e-filing and submission of returns. Contact us if you need assistance with your 2021 tax submission.

Article sourced from Legal&Tax.

See also:

(This article is provided for informational purposes only and not for the purpose of providing legal advice. For more information on the topic, please contact the author/s or the relevant provider.)
Johan Swart

Johan Swart is head of Tax at Legal&Tax. He is registered as a Master Tax Practitioner with SAIT and has been with Legal&Tax for 13 years. Read more about Johan Swart


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