WHAT IS INCOME TAX
We just had a masterclass webinar on Individual Income Tax Returns hosted by our sister company Bookkeeping Academy – http://www.bookkeekingacademy.org
Income tax – is a tax governments impose on the income that
businesses and individuals generate
PAYE
– Individual income tax is deducted on the employee salaries by the employer
and pay the funds to SARS via the Pay As You Earn
– Employers are required to withhold these taxes each month and pay them
over to SARS on the taxpayer’s behalf. They do this by consulting the SARS
PAYE tables which have different tax rates for employees who are paid
weekly, fortnightly or monthly.
The PAYE calculated as a result is based on the employee’s earnings and includes basic salaries, bonuses, fringe benefits
and other allowances.
IRP5
– The IRP5 certificate is a summary of all the remuneration (including
allowances and benefits) provided to an employee by an employer during a
tax year. This will exclude amounts paid outside the payroll, for example, the
reimbursement of a pure non-travel business expense that is paid to the
employee via the general ledger.
– If an employee receives benefits such as travel allowance from their
employer,they need to keep a travel log book. It will have a detailed summary
of the mileage travelled. The log book includes the dates, start travel km in a day and end km after all the business travel on a daily basis.
– Failure to keep a travel log book may result in a liability towards SARS.
Fringe Benefits
– Fringe benefits are additions to compensation that companies give their
employees. Some fringe benefits are provided to all employees, while others may be offered to executives only.
– Some benefits may include a company car, paid time off, or gym membership.
Most fringe benefits are taxable at fair market value but some benefits, such as
health and life insurance, are nontaxable.
PROVIDENT FUND
– A provident fund is a government-managed retirement savings plan that helps employees prepare for retirement. Employees and their employers contribute to the plan.
– The provident fund is administered by investment companies / Financial institutions who act as the brokers and financial advisors.
– They need to be qualified to ensure compliance.
Receiving an Additional Income
– Individuals that are paying tax via the PAYE as a result of being fully
employed, but equally receive an additional income such as rental income, selling goods or services, etc must also declare separately so they can pay tax where applicable.
– You will be required to calculate the overall income received within every tax period against expenses incurred then get taxed on the profit – referred to as a taxable income.
– Failure to declare an additional income may result in penalties and heavy tax
liabilities to SARS.
TWO POTS SYSTEM
– While it is called the two-pot system, your future retirement savings are actually split into three “pots”.
Your savings will be allocated to savings, retirement and vested pots.
You can withdraw from your savings pot once every tax year as long as you have at least R2 000 to withdraw.
– The maximum amount to withdraw is R30 000,00
– Savings pot
One third of your contributions will be saved in a savings pot that you can access once in a tax year.
– Retirement Pot
Two-thirds of your contributions will be saved in a retirement pot that you cannot access until retirement.
The two-pot system, in fact, introduces three pots, because what you have saved when the new system comes in will be held in a third pot:
– Vested Pot
This pot will hold your savings in the fund made before 1 September 2024 plus fund return on this. You will
generally be able to do with the retirement savings in this pot what you could do with your retirement
savings before 1 September 2024. So, for example, you can still take it in cash if you resign, are
retrenched or dismissed from an employer-sponsored fund, but your savings in this pot in a retirement
annuity (RA) will generally not be available until age 55.
Compiled by Ms. Dikeledi Seoloane on behalf of Matsobanemetja Business Consulting (Pty) Ltd – Registered Accountant and Certified Tax Practitioner.
We have well trained and qualified staff that manages the aspect of individual taxes efficiently under our specialty department Wedotax.
We are the fast growing accounting service-providing agency in South Africa and across the globe.
If you need a consultation with us with regards to your business, any type of business – please reach out to us by email hello@matsobanemetja.blog
Matsobanemetja Business Consulting (Pty) Ltd offers a wide range of bookkeeping and accounting services, tailored to your business needs at an affordable price.
You may please inquire with us by sending an email to enquiries@matsobanemetja.co.za
It’s income tax time again, Citizens: time to gather up those receipts, get out those tax forms, sharpen up that pencil, and stab yourself in the aorta.
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