What Income is Taxable in South Africa?
24 Oct 2023
As a resident of South Africa, have you ever wondered what part of that income is taxable? Let’s dive into understanding the specifics under the Income Tax Act of South Africa, a key legislation dictating taxes on earnings. This includes not just local but also foreign revenue sources!
Remember, knowing tax laws help manage funds more effectively.
Salaried Income
In South Africa, any salaried income is considered taxable revenue under the Income Tax Act system. However, certain conditions can affect the amount of salary deemed taxable in South Africa.
For instance, if an individual works overseas for more than 183 days in a 12-month period, with a minimum of 60 consecutive days within that timeframe, their foreign earnings may be partially or totally exempt from local taxation.
According to the South African Revenue Service (SARS), only weekdays when services are rendered count towards calculations. These calculations do not include Weekends and holidays, providing an opportunity to reduce one’s liability under SARS legislation.
Self-employment income
Self-employment income forms an integral part of taxable revenue in South Africa. Your earnings are categorised as self-employment income if you’re running your own business or doing freelance work.
Income tax thresholds
Tax threshold functions differently for individuals of different ages.
For the 2023 year of assessment (1 March 2022 – 28 February 2023)
- R91 250 if you are younger than 65 years.
- If you are 65 years of age up to 75 years, the tax threshold (i.e., the amount above which income tax becomes payable) is R141 250.
- For taxpayers aged 75 years and older, this threshold is R157 900.
As your earnings increase, a larger proportion becomes taxable.
2024 tax year (1 March 2023 – 29 February 2024)
| Taxable income (R) | Rates of tax (R) |
|---|---|
| 1 – 237 100 | 18% of taxable income |
| 237 101 – 370 500 | 42 678 + 26% of taxable income above 237 100 |
| 370 501 – 512 800 | 77 362 + 31% of taxable income above 370 500 |
| 512 801 – 673 000 | 121 475 + 36% of taxable income above 512 800 |
| 673 001 – 857 900 | 179 147 + 39% of taxable income above 673 000 |
| 857 901 – 1 817 000 | 251 258 + 41% of taxable income above 857 900 |
| 1 817 001 and above | 644 489 + 45% of taxable income above 1 817 000 |
It is important to remember that timely payment is essential, as avoiding legal penalties enforced by SARS is imperative. SARS policies are announced annually during budget presentations made by the Financial Minister!
Investment and pension benefits
Turning your focus to investment and pension benefits can help you optimise tax advantages. The limit for total retirement savings contributions, which includes pensions, is R350,000 per annum. Anything above this rolls into future years and is automatically deducted from taxable income. Returns on investments like interest earnings or capital gains don’t attract tax in a Retirement Annuity (RA).
Similarly, up to one-third of your RA value at retirement may be drawn as a lump sum without any taxation extended up to the first R550,000 taken out. The idea here isn’t just about saving but creating an efficient plan that works best for your financial goals while leveraging the relief available under South Africa’s Income Tax Act.
Property and other income
Should you own property in South Africa, the rental income generated is subject to tax. This applies whether you’re a resident or non-resident for tax purposes. Remember that upkeep expenses such as maintenance can be deducted from this taxable income.
The same goes for any profit from trading shares listed on South African stock exchanges. Service providers not residing but performing tasks within our borders should note that their incomes are also bound by South Africa’s taxation laws.
Don’t forget about royalties collected from copyrighted works distributed locally; they also fall under ‘taxable’! So, stay vigilant with all sources of revenue coming in while interacting financially wiithin South African.
Missing a tax payment could mean trouble with SARS. You should know that most of your income is taxable in South Africa. This includes salary from employment or profits from self-employment. Other sources such as bonuses, royalties, or rental incomes are also subject to tax.
Even retirement annuity withdrawals are not exempt. However, foreign income may have certain exemptions depending on conditions set by SARS. So, stay informed and seek professional advice if needed.
(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.)