Freelance Work And Tax

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Ramsy

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Does anyone here do freelance work while working full time? i have been wondering about the tax implications of this, can you advice on the following:

1) Does SARS see this as an extra income on your personal income?
2) if it does sees it as that does this push you into a new tax bracket?
 
so is there any easy way to get around it. maybe pay it into a company that you have created?
 
lol @ mister

On the work front, of course SARS will see it as extra income and tax you accordingly. Dont worry about the brackets and stuff, the whole notion of being pushed into a 'new tax bracket' and coming out with less money all of a sudden is wrong. If you earn more you will still earn more take home pay regardless of the tax. So if you earn more, you will be taxed more, end of story.

This is all considering SARS actually finds out. If its a backyard cash deal, you'll be ok, but if you're working for a company, they will most probably book your pay to your tax number and issue an IRP5 and you'll have to file that.
 
I think I know how you feel. When tax is taken straight off your salary you don't really feel it but on personal income its a pain. Like the poster said above,in theory you'll be taxed more but depending on how your paid, declaring it is your choice.
 
its easy to hide the money, but if you are doing working for a business and they pay into your bank account. then it`s a problem is SARS ever decide to audit you. guess there isnt really a way around the tax man. oh well
 
Declare and pay you don't want trouble from SARS it never ends well.

On the other hand if you give me a lift to work and I give you R500 cash in your hand... go buy yourself something nice and don't break your head about it. In all fairness SARS taxed that R500 on my salary when i earned it already, always feels so greedy that you have to be taxed now as well on that same R500. But the way it works is you have to declare that R500 and get taxed :(
 
Ramsy said:
so is there any easy way to get around it. maybe pay it into a company that you have created?
Click to expand...

There is always a (legal) way to pay less tax, or no tax at all.
Use the business for all your freelance work, then you will legally be able to also claim tax deductions (business expenses - the list is endless) as well. If the company is still new (or your tax deductions exceeds your taxable income), then you might get a *tax loss* and wont pay any tax at all.
 
Ja, remember though, if you go the business route, it brings with it a whole bunch of admin. And then if you draw a salary from the business, it'll have tax implications for both the business and yourself, lol.
 
Let me try explain what has happened to my mother. The figures below are just for illustration.

She was a teacher and is now on pension. She gets R5000pm and gets taxed at 10% on that. Take home is R4500pm.

Due to the teacher shortage she was asked to start teaching again on a contract basis. (This not to affect her pension) She gets R15000pm and get taxed at 15% so take home is R12750.

But she is actually earning R20000pm and her tax bracket should be 20%. So she should be paying R4000pm tax but shes only paying R2750pm (R500 + R2250). She is paying R1250 x 12 = R15000 per year less tax. So every year she has to pay in R15000 to SARS.

Actual : She has just finished paid up 2 year tax equalling about R35K. She has now learnt that other teachers in similair situations are saving between R700 & R1200 per month to pay into SARS every year.
 
guess its true what they say. they are only two assured things in life death and taxes.

Think what ill do is go the company route and then keep the money in the business name, then end of the year pay myself a bonus and give SARS the tax money. Man i hate tax sometimes.
 
Ramsy said:
guess its true what they say. they are only two assured things in life death and taxes.

Think what ill do is go the company route and then keep the money in the business name, then end of the year pay myself a bonus and give SARS the tax money. Man i hate tax sometimes.
Click to expand...
Not sure how legal this is, but if you are married and your wife (or any family member or something) doesn't work, you could always pay her a salary instead of you from your business - maybe she does your books, i dunno?! :p So its not your income thats taxed.
I guess its a bit fraudulent, but its gotta be happening all over.
 
markface said:
Not sure how legal this is, but if you are married and your wife (or any family member or something) doesn't work, you could always pay her a salary instead of you from your business - maybe she does your books, i dunno?! :p So its not your income thats taxed.
I guess its a bit fraudulent, but its gotta be happening all over.
Click to expand...

If you pay her below the tax rate ( salary of around R 4 919 per month), then her salary will effectively be *taxfree* because the rebates will cancel out that tax due :)

100% legal.
 
I've also just started doing some online transactions. Will be getting around R0 - R4000 a month via PayPal from overseas clients. This will be over and above my normal fixed salary which is taxed. The cash will come into my PayPal account and then be transferred to my FNB account. Will there be tax on this or is it below the tax rate? If there is tax, can I get away from it by declaring the income as a gift?
 
marco79 said:
Let me try explain what has happened to my mother. The figures below are just for illustration.

She was a teacher and is now on pension. She gets R5000pm and gets taxed at 10% on that. Take home is R4500pm.

Due to the teacher shortage she was asked to start teaching again on a contract basis. (This not to affect her pension) She gets R15000pm and get taxed at 15% so take home is R12750.

But she is actually earning R20000pm and her tax bracket should be 20%. So she should be paying R4000pm tax but shes only paying R2750pm (R500 + R2250). She is paying R1250 x 12 = R15000 per year less tax. So every year she has to pay in R15000 to SARS.

Actual : She has just finished paid up 2 year tax equalling about R35K. She has now learnt that other teachers in similair situations are saving between R700 & R1200 per month to pay into SARS every year.
Click to expand...

In the old days if you earned two completely separate salaries which were both below the tax threshold, then you could score from what was called the sum of SITES, I.e. You were paying site tax only and not PAYE. I see that SARS are now requiring that you register for tax regardless of your earnings now, as long as you are a salary earner. Based on this, I suspect that they will pick up if you are earning two incomes.

Each "employer" will tax you as if the only income you earn is from them, so yes, you would end up underpaying tax. My suggestion, inform the new employer of the pension fund and up the tax on the contract work.
 
SaiyanZ said:
I've also just started doing some online transactions. Will be getting around R0 - R4000 a month via PayPal from overseas clients. This will be over and above my normal fixed salary which is taxed. The cash will come into my PayPal account and then be transferred to my FNB account. Will there be tax on this or is it below the tax rate? If there is tax, can I get away from it by declaring the income as a gift?
Click to expand...

You cant get a R4000 gift every month, can you? As soon as the income starts becoming recurring, you are practising a trade and it is seen as income. You are intentionally trying to make money. In my mind, if the tax effect of this after being caught out, will burn a hole in your pocket, then rather declare it.


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markface said:
Not sure how legal this is, but if you are married and your wife (or any family member or something) doesn't work, you could always pay her a salary instead of you from your business - maybe she does your books, i dunno?! :p So its not your income thats taxed.
I guess its a bit fraudulent, but its gotta be happening all over.
Click to expand...

100% legal. At most, you might have to motivate her receiving an income, but proving that is almost impossible. The other advantage of a business is that you can structure your own salary. And what is left in the company gets taxed at 28%

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This reminds me. Hope someone can help me with this.

My wife studies full-time and I work full-time. We're in the process of starting our own little business and eventually I hope to quit my job and help her with it on a more permanet basis.

What's the best way to do this. Have all income and expenses come from her account, thereby saving me from the additional tax I will get charged? Set up a CC and how will the tax work in this scenario?

Any advice would help!
 
grav80 said:
This reminds me. Hope someone can help me with this.

My wife studies full-time and I work full-time. We're in the process of starting our own little business and eventually I hope to quit my job and help her with it on a more permanet basis.

What's the best way to do this. Have all income and expenses come from her account, thereby saving me from the additional tax I will get charged? Set up a CC and how will the tax work in this scenario?

Any advice would help!
Click to expand...

Depends on the type of business. If it is a part time wedding photography for example, it may be easier to run it as a sole prop, as creating a separate entity has costs involved. But if it is a serious business, I prefer keeping it seperate, with a dedicated bank account and running in a CC. You will be taxed at 28% which is lower than the 40% max threshold for individuals, and that is after structuring a salary for yourself and your wife. Yes, you will have to keep books and have financials but any good business should have that. If you are not sure that it will work, maybe try as a sole prop, but if you have a business plan why not create a seperate business? Especially if there are legal and monetary risks involved.

Sent from my HTC Hero using MyBroadband Android App
 
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