Have you every heard of someone talking about how much money they got from SARS.

We thought it would be a great idea to try and explain the basic principles of tax for individuals and how it works.

So first things first. The Tax Year. The tax year for individuals are all from March - February in South Africa.

You are taxed on all taxable income received during a tax year. This would include Gross Income (Salaries, Commission etc) Minus deductions and rebates that SARS allows (Pension, Retirement annuity, Medical Scheme etc.)

Most people in South Africa work as an employees and receive salaries. It is the employers responsibility to deduct Tax from your salary before paying you the net salary. (Gross Salary - Tax - UIF = Net Salary) This is done every single month before you receive your pay and this would be shown on your payslip.

Now as we mentioned, you are taxed on your taxable income for a tax year and you have already paid taxes every month for that tax year. Your employer calculates the tax according to the information they have on file. If you have a private medical aid or retirement annuity and haven't informed them, the chances are they are not taking it into account when calculating your monthly taxes.

Example:

You get R10 000 Gross Pay each month

The amount of tax and UIF your employer should be deducting is R363.75 and R100 respectively

You will then be receiving R9 536 in your bank account as your net pay

You have then paid R4 365 for the tax year (363.75 x 12)

Now, if you had a private retirement annuity (R1 000 per month) the changes will be as follows:

Your employer will still deduct the tax as per usual, because they are unaware of the retirement annuity. R363.75 per month, R4 365 per annum

Your yearly taxable income would change from R120 000 (R10 000 x 12) to R108 000 (R120k - (R1 000 x 12)

As SARS allows a deduction of retirement annuity contributions up to 27.5% of your earnings.

This would mean that you get a refund from SARS of R2 160.

The most important thing to take note of is the term "REFUND" This implies that you get something back from SARS i.e. You paid R4 365 and received a refund of R2 160 as this was overpaid during the year.

If you have not paid any taxes during the year for some reason, with the same info as mentioned above, you would have to make a payment of R2 205 to SARS.

If you have not paid any tax to SARS during the year, there cannot be a refund.

This is merely a short attempt to explain how taxes for individuals work and it would be impossible to cover all the aspects of this in a single post.

Should you have any queries or help with your taxes, we are just a phone call or email away.