Tax season is open and, if you still have some lingering questions about what income tax is and how it all works, you have come to the right place. If all of this is a bit to foreign, remember that you can always find a tax practitioner on Junk Mail to help you make this tax season so much easier.
What is Income Tax and who should be paying it?
SARS defines income tax as the normal tax an individual pays on their taxable income.
Your taxable income is the amount you receive within a financial year. Now for some of us this might only be our monthly salaries, but there are quite a few types of incomes that you can receive. All of these incomes are combined to determine your taxable income.
The types of incomes used in order to determine your total taxable income includes:
- Your salary or monthly wages. This includes overtime, your fringe benefits, your company allowances and even your bonus.
- The income you might have made from your investments.
- Your income from your pension as well as certain capital gains.
- Income or losses you might have suffered from rent paid to you.
- Your annuities and income you might have made from royalties paid to you.
- Losses you might have suffered or income you might have made from trade or business.
- The losses or income you made from being a beneficiary of trust for example.
- Director’s fees.
The ‘who’ who should be submitting an income tax return part is a bit easier.
If you earn under R350 000 – this is the total income you get before tax – in a year from your employer and you have no other income (like income from rent paid to you or even interest) and you have no other deductions that need to be claimed (this is stuff like travel, your medical expenses and even your retirement annuity), you do not need to submit a tax return.
Please Note – We highly recommend that visit the ‘Do I need to pay tax page’ on the SARS website for more information on who needs to file income tax returns. This writer will highly recommend finding a tax practitioner. Tax practitioners are beautiful creatures that fully understand everything income tax related. I also suggest registering for SARS e Filing – this will make your life SO much easier.
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The SARS Tax Season and the Tax Return Deadline
Tax season is open and, if you haven’t filed your income tax returns yet, you better get on that. Tax season in South Africa runs every year from July to November, giving taxpayers more than enough time to get those returns to SARS along with all the needed documents.
This year’s season kicked off on the 1st of July, 2016, with the tax return deadline being on the 25th of November, 2016. The financial year for the 2016 tax returns spans from 01 March, 2015, to 29 February, 2016.
An Income Tax Table and those Income Tax Brackets work
So, how are the tax rates determined?
These rates are determined by Parliament on an annual basis and is referred to as statutory rates or marginal rates of tax. These rates are announced during our annual budget speech by the Minister of Finance. It is during this time that new income tax tables are published.
You might have heard people say that they are moving into a new tax bracket. This is not 100% accurate. Look at it like this – It is not your entire income that is taxed at a higher rate but rather the income above a certain tax bracket that is taxed at a higher rate.
Look at the 2016 Income Tax Table for example:
| Taxable Income in Rand | Rates of Tax in Rand |
| R 0 – R 181 900 | 18% of every R1 (This means that you pay 18% on every Rand when you earn a maximum of R 181 900) |
| R 181 901 – R 284 100 | R 32 742 + 26% tax on the amount you earn above the R 181 900 |
| R 284 101 – R 393 200 | R 59 314 + 31% tax on the amount you earn above the R 284 100 |
| R 393 201 – R 550 100 | R 93 135 + 36% tax on the amount you earn above the R 393 200 |
| R 550 101 – R 701 300 | R 149 619 + 39% tax on the amount you earn above the R 550 100 |
| R 701 301 – Above | R 208 587 +41% tax on the amount you earn above the R 701 300 |
Remember that these build on each other and that you can’t jump from one to the other. For example say you earn R 393 200 per annum.
This means that the first R 181 900 you earn is taxed at 18%. Then the amount you earn from R 181 900 to R 284 100 (which is R 102 200) is taxed at 26%. Then, the amount you earn from R 284 101 to R 393 200 (which is R 109 099) is taxed at 31%.
So income tax brackets build on each other. The simplest way to look at this is that the money you earn above a specific tax bracket moves into the next bracket and so on. If you earn R 393 200 you won’t be paying 31% on all of that money, but rather the money in the R 284 101 to R 393 200 tax brackets.
To help you out for the next financial year, here is the 2017 Income Tax Table with those income tax brackets. This financial year spans from 1 March, 2016, to 28 February, 2017.
| Taxable Income in Rand | Rates of Tax in Rand |
| R 0 – R 188 000 | 18% of every R1 (This means that you pay 18% on every Rand when you earn a maximum of R 181 900) |
| R 188 001 – R 293 600 | R 33 840 + 26% on the amount you earn above the R 188 000 |
| R 293 601 – R 406 400 | R 61 296 +31% on the amount you earn above the R 293 600 |
| R 406 401 – R 550 100 | R 96 264 + 36% on the amount you earn above the R 406 400 |
| R 550 101 – R 701 300 | R 147 996 +39% on the amount you earn above the R 550 100 |
| R 701 301 - Above | R 206 964 +41% on the amount you earn above the R 701 300 |
SARS e Filing
You might have heard of the e Filing system and boy can I tell you that it definitely makes your life a whole lot easier. As user friendly as an online tax return system can be, some of the benefits of registering for SARS e Fling include:
- It’s free. The e Filing system is totally free to use and you can even find useful guides to help you out. The Help you e File function is also available and entails a SARS agent to help you with filing your income tax returns.
- You don’t have to wait in a que that looks like it goes on for days. With the e Filing system you can submit your returns, make payments and view your tax status anytime that best suits you.
- If you are a registered user, you also have more time to make both your submission and payments when and if necessary.
- Because this is a fully electronic system that allows you to double check everything, mistakes on your returns are less likely (when compared to the good old pen and paper).
- On SARS e Filing you also have access to your returns history.
- Another benefit for registered users is that they receive email and SMS notifications concerning their returns.
You can register for e Filing by visiting www.sarsefiling.co.za.
How to Calculate Income Tax
The tax rate levied (on you) is calculated by making use of a sliding scale. This results in the tax payable increasing as your taxable income increases. Like discussed with the income tax tables above, remember to keep those tax brackets in mind when calculating your tax.
If you are not all into the maths of it all and would prefer using an income tax calculator, we have you covered (frankly because the math of it all is just a little bit too much).
- Old Mutual has a cool, straight forward income tax calculator that will definitely give you an overall idea on your returns. Check out Old Mutual’s Calculator.
- Sage also offers a Salary Tax Calculator which is pretty cool.
- Tax Time offers a nifty calculator that can help you determine what tax you will pay within a financial year. You can check out the Tax Tim Calculator here.
- Fin24 also offers a useful income tax calculator. Visit the Fin24 Tax page.
Remember that no income tax calculator will be on the dot all the time and it is always advisable to use these online tools as guides and estimates rather than a definite.
What you will need to submit your Income Tax Return
Documentation is part of our everyday lives especially when it comes to filing your returns. Some of the documents you will need includes:
- Your IRP 5 or IT3(a) that you will get from your employer or your pension fund.
- If you have investment returns, you will need a IT3(b).
- If you get a travel allowance or anything of that nature, a detailed log book should be submitted along with your income tax return.
- You bank account details.
- Should you have income from a business for example, you will need financial statements.
- If you have a retirement annuity, you will need that fund certificate.
- Should you have received income from local investments, you will require those certificates.
Should you have received any other income or paid any types of deductions, you will also need to submit the relevant documentation there. Again, if this is all new to you and you would like some advice, find a tax practitioner to help you out.
Keep in mind that, while some of these documents might need to be uploaded (when you are doing your SARS e Filing) or go along for the trip to your SARS branch if you are filing your returns there. These documents should be kept for five years. This means that, if you were a tax payer in 2012, you should still have your IRP5 for example.
How to choose a Tax Practitioner
I’ve been subtly hinting at finding a tax practitioner throughout this article and now I am going to give a couple of tips on choosing the right practitioner.
When deciding on a professional tax practitioner, remember to ask him or her what their experience with tax is as well as their qualification and registration. The more experience he or she has, the better they know how to jump through SARS’s hoops. Someone from an accounting firm will also know a little bit more about the actual filing of returns.
While some of us just have that pretty straightforward IRP 5 to submit, other people’s taxes can get pretty complicated really quickly. If you earn any extra income (maybe from rent from a property you own) things start to get a little more complicated. Ask the practitioner the cases he or she has dealt with in the past. If your taxes are a little bit more complicated, opt for a practitioner that work with clients that have a bit more robust portfolios.
Always ensure that your practitioner has all the documents he or she will require. This means that you will need to explain all your incomes (and all that jazz) to him or her. From here they will be able to give you full list of the documents they might require to file your returns.
Another important thing to ask is how their fees are calculated and, should you get audited, if that practitioner will also deal with that on your behalf.
Now we get to SARS e Filing. Remember to ask whether your practitioner will be using either specialised software or the e Filing system to submit your income tax returns. Remember that electronically submitted tax returns are processed quicker.
Now that we have hopefully prepared you for this tax season as well as tax seasons to come, you can get on with filing your income tax return. If you would rather trust a knowledgeable professional, look for an experienced tax practitioner on Junk Mail. Do you offer services? Place your free ad on www.JunkMail.co.za.
