Today let's see whether or not the tax that appears on your pay slip you receive from your employer has been calculated correctly.
Let's assume your salary package is R60 000 a year, structured as follows:
Basic salary: R34 000;
Travel allowance: R14 000;
Entertainment allowance: R2 500;
Cellphone allowance R2 000; and Computer allowance R4 500.
To see if the tax on your slip is correct, you will need a tax table, which is also used by the Receiver to calculate your annual tax from the information you submit in your tax return.
Your monthly pay slip will show the amounts as set out in the pay slip example attached.
The amounts in the brackets - the annual amounts - add up to R57 000 - although your employer told you that your total package is R60 000. The R3 000 a year or R250 a month that does not appear on your pay slip is paid directly to your pension, provident and/or medical aid institutions.
This is to your advantage because if the R250 had been reflected on your pay slip, it would have taken your pay to R5 000 a month or R60 000 a year and you would have been liable for more tax.
Now to calculate your tax for one month, follow the example in the table below. First you need to work out your basic salary less deductions and plus allowances.
Then you need to work out your annual taxable income and look up your tax liability on the tax table alongside. Deduct the rebate we all qualify for and then divide by 12 for a monthly rate.
EXAMPLE PAY SLIP
Basic salary
R2 833
(R34 000 divided by 12 months)
Travel allowance
R1 167
(R14 000 divided by 12 months)
Entertainment allowance
R208
(R2 500 divided by 12 months)
Cell-phone allowance
R167
(R2 000 divided by 12 months)
Computer allowance
R375
(R4 500 divided by 12 months)
THE TAX TABLE
Row
Taxable Income
Rates of Tax
1
R0 - R35 000
18% of every R1
2
R35 000 - R45 000
6 300 + 26% of amount over R35 000
3
R45 001 - 60 000
8 900 + 32% of amount over R45 000
4
R60 001 - 70 000
13 700 + 37% of amount over R60 000
5
R70 001 - 200 000
17 400 + 40% of amount over R70 000
6
R200 000 and over
69 400 + 42% of amount over R200 000
TO CALCULATE YOUR TAX FOR A MONTH
Basic salary
R2 833
Less: your pension contribution, medical (only if
you are over 65 years old), or retirement annuity contribution for the
month. There are certain limits here.
(R1 500)
Travel allowance
Remember that only 50 percent of this allowance is
taxed during the year and expense deductions will only be made at the
year end.
R584
Entertainment allowance
Deductions only at the year end
R208
Cell phone allowance
Deductions only at the year end
R167
Computer allowance
Deductions only at the year end
R375
Monthly employment taxable income
R2 667
Annual employment taxable income
This R2 667 a month means that your taxable income
for the year will be R32 004 (multiply R2 667 by 12 months).
R32 994
Using the tax table above, you fall into row one (R0
- R35 000), therefore your tax liability will be 18 percent of R32 004
which equals R5 760.
R5 760
Now deduct R3 800 - this is the rebate from everybody's
annual tax liability which can be seen as a generous concession by the
Receiver to all of us.
(R3 800)
Your annual tax liability
R1 961
Your monthly tax liability
Divide R1 916 by 12 months for the tax amount your
pay slip should show.
R163