Personal Income Tax

With the deadline of the submission for normal taxpayers coming up, we would like to draw attention to what personal income tax entails. The tax deadlines for the submission of personal income tax are:

• Individual taxpayers – 23 October 2023
• Provisional taxpayers – 24 January 2024

Whenever a person receives income, it is most likely that this income is derived from a nature that would be regarded as taxable income. South African taxpayers are taxed on a sliding scale, which is updated annually during the budget speech. The taxable income earned during the year of assessment, which for individual taxpayers are from 1 March to 28 February each year, determines the sliding scale in which you will be taxed.

Taxable income:

There are various forms of income that is deemed to be taxable. The following are examples of income which determines your taxable income:

• Income earned from employment – salaries, wages, commission, overtime, fringe benefits, bonusses.
• Income earned from carrying out a trade – rental income, services rendered.
• Income received from being a beneficiary of a trust.
• Profits from rental income.
• Pension income.
• Capital gains.

Tax thresholds:

During the budget speech, the tax threshold for the relevant tax year is determined. This threshold is the indication on who should be paying tax. Every person received a tax rebate during the year of assessment. This rebate lowers the tax liability of the taxpayer; however, this rebate cannot result in a refund. If your total taxable income is below the tax threshold, you will not be liable to pay tax. These thresholds differ annually, and it differs depending on the age of the taxpayer.

The thresholds (and rebates) for the 2023 tax year are:

• R91,250 if you are younger than 65 years (R16,425).
• R141,250 if you are between 65 years and 75 years (R25,425).
• R157,900 if you are older than 75 years(R28,422).

As evident above, the rebates shown in brackets is based on the lowest tax rate (currently 18%) of the tax threshold. The rebate will not result in refund. A tax refund will only tax place if a person has paid taxation during the year and the tax paid was more than the tax liability.

Taxable deductions:

A person can deduct qualifying expenses from taxable income, however, SARS has specific guides and rules related to these deductions. Some examples of allowable deductions include:

• Medical Aid tax credits
• Additional medical aid tax credits
• Retirement Annuity contributions
• Home office expenses
• Expenses directly related to commission income
• Travel expenses

The above are some examples, and each example has its own requirements before SARS will allow these deductions.

Auto-assessments:

SARS has implemented a system which analysis historical and current data on their systems and then issue auto-assessments to some taxpayers. The auto-assessment process started in the 2022 tax year, however, has changed in the 2023 tax year.

During 2022 the taxpayer was awarded 40 days to revise their return if it was automatically assessed by SARS, however, for the 2023 year, the taxpayer has until 23 October 2023 to revise their return if they disagree with SARS. If an auto-assessment occurs after 23 October 2023, the taxpayer has 40 business days after the assessment date.

It is important to note that SARS uses information available to them to complete the auto-assessment, and there may be instances where the auto-assessment is not accurate, so it is important to still verify the assessment for accuracy.

Should you submit an income tax return:

SARS has allowed certain taxpayers to not file a tax return, however, the conditions to qualify for this are:

• You earned below the tax threshold, or;
• You received income from 1 source which is below R500,000 and taxation was deducted from this income, and
• You did not receive any other allowances, fringe benefits, or want to claim any deductions, and
• You did not carry any other trade or earn any other income

If you meet the above criteria, you may be exempt from submitting an income tax return for the year.

How is my tax liability or refund calculated:

During the year of assessment, your taxable income is calculated from the various sources of income, and the allowable deductions. The taxable income is then used to determine the correct tax sliding scale, and the taxation for the year is then calculated.

After the total taxation for the year has been calculated, the relevant rebates are deducted. During this, the PAYE deducted from your income and provisional tax payments (if applicable) are deducted. The net result after this is the tax liability due to, or tax refund due from SARS.

Other important information:

The above is merely an introduction to personal income tax. There are various other items not discussed in full detail in the above, however, this guide serves as an indication as to what to expect when in comes to personal income tax.

It is very important to remember that the burden is on the taxpayer to prove any deductions which might be claimed from your taxable income, and not for SARS to prove as incorrect. Incorrect and inaccurate information submitted to SARS carries the risk of fines and penalties, and in some instances criminal charges.

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