Last week I discussed the main categories in which the Receiver classifies
taxpayers. This week let`s look in more detail at what it really means to be
a "SITE only taxpayer" and in following weeks we`ll deal with the other
categories.
This Standard Income Tax on Employees (SITE) is the amount of tax the
employer pays over to the Receiver on behalf of an employee, and it is not
normally refundable. All remuneration (salary, wages, overtime pay, bonuses,
commission, pension, half of your travel allowance and all other allowances)
and other benefits that the employer gives you as an employee, less the
expenses the Receiver allows you to deduct from that remuneration, will be
taxed monthly.
When calculating your taxable income, all you can deduct from your monthly
remuneration are pension contributions, retirement annuity contributions and
medical expenses. There are limits to the amount you can deduct.
Normally, as a condition of your employment, you have to belong to your
employer`s pension or provident fund, so your employer will know how much
you contribute. Unfortunately, contributions to a provident fund are not tax
deductible!
It is your duty to inform your employer how much you contribute to your
retirement annuity fund, because it is normally not compulsory to belong to
one, but many people do so, to improve their income on retirement. Also, it
is your duty to inform your employer about the medical costs you have
incurred every month, so that these can be used to reduce your taxable
income and tax.
Remuneration less these expenses gives you net remuneration (or monthly
taxable income from employment). If your net remuneration for the year
exceeds R60 000, you will no longer belong to this category, but will now be
a "SITE and PAYE taxpayer", and you will have to submit an annual tax
return. At the end of the month, the employer will calculate your net
remuneration and multiply it by 12 months, as if you worked the whole year.
And if it exceeds R60 000, the tax on the amount in excess of R60 000 will
be referred to as "Pay As You Earn" (PAYE), which could be refundable to you
under certain (unlikely) circumstances, because you do not have allowances.
If you decide to contribute to a retirement annuity fund, you will reduce
your tax every month, because those contributions are allowed as deductions
by the Receiver. But first see if you need more retirement benefits at the
time of retirement and only then consider tax savings.
Do not just contribute for the sake of reducing tax, other types of
investments could give you better returns than current tax savings and
retirement benefits. It`s not a good idea to do things just to save tax.
Plan your affairs so as to get the returns that will satisfy you - not just
in the form of money, but personal satisfaction, interest and peace of mind.
* Tlamelo Ramantsi is a manager at accounting firm Gobodo Inc.