Simple Tax

Dolby

Dolby

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Very simply, is this how the basics work :

I earn R10,000.00pm cash (R120,000.00pa) and my tax rate is 20% (R24,000.00). Every month, my company take R2,000.00pm and deposit R8,000.00 into my account.... so at the end I've paid exactly my R24,000.00 and SARS owe me nothing/I owe them.

If they're not good at keeping records and take only R1,800.00pm from me - that means at year end, SARS wants the extra R2,400.00 from me? However, if they end up taking R2,500pm from me - at the end of the year they owe me R6,000.00?
 
That's simplified almost to the point of unrecognisability, but yes.
 
Thanks - exactly what I wanted ... a simplified, hypothetical

Now to add :

That is primary job above - so am I right in saying that when people refer to my marginal tax rate, it'd be the 20% figure above - and every bit of income I get there after (interest, rent etc) are all charged at my marginal rate of 20%?

So - I inherited R10 million from my uncle and put that in the bank. I get R50,000.00pm interest on this (R600,000pa). Obviously the full interest is payable at year end - so I'd be liable for R120,000.00 marginal interest on this interest?

* I know there is a certain amount non taxable, but to keep it simple let's assume there isn't.
 
Well no.
You see as your income (from whatever sources) increases, the tax on portions of your income increases. Once you hit a certain income level, then all income above that level is taxed at 40% (the marginal tax rate).
 
Dolby said:
Thanks - exactly what I wanted ... a simplified, hypothetical

Now to add :

That is primary job above - so am I right in saying that when people refer to my marginal tax rate, it'd be the 20% figure above - and every bit of income I get there after (interest, rent etc) are all charged at my marginal rate of 20%?

So - I inherited R10 million from my uncle and put that in the bank. I get R50,000.00pm interest on this (R600,000pa). Obviously the full interest is payable at year end - so I'd be liable for R120,000.00 marginal interest on this interest?

* I know there is a certain amount non taxable, but to keep it simple let's assume there isn't.
Click to expand...

No. Your tax bracket would have changed.
 
Get the tax tables from SARS' site, you can see what your marginal tax rate is. We have a progressive system, so as you move through the income brackets your marginal rate increase to eventually the maximum of 40%.
 
Someone once commented - "betaal die keiser wat hom toekom - nie wat hy vra nie" :D
 
Dolby said:
Very simply, is this how the basics work :

I earn R10,000.00pm cash (R120,000.00pa) and my tax rate is 20% (R24,000.00). Every month, my company take R2,000.00pm and deposit R8,000.00 into my account.... so at the end I've paid exactly my R24,000.00 and SARS owe me nothing/I owe them.

If they're not good at keeping records and take only R1,800.00pm from me - that means at year end, SARS wants the extra R2,400.00 from me? However, if they end up taking R2,500pm from me - at the end of the year they owe me R6,000.00?
Click to expand...
"They", being SARS, will not pay you back unless you claim it. That your employer does a crappy job with your calculation puts you (not them) at risk with SARS.
 
I have another question :

Assuming the above R120,000.00pa and my company does its records correctly and takes R24,000.00 (20%) off my salary throughout the year

Now my inheritance generates that R600,000.00 - but that now puts me into a 40% tax bracket. So I'd need to pay the R240,000.00 (40%) tax my income AND the extra 20% on my salary which the company didn't know about ... so another R24,000.00?

So total tax for the year R288,000.00 and I'd have automatically paid R24,000.00 of that?
 
Dolby said:
I have another question :

Assuming the above R120,000.00pa and my company does its records correctly and takes R24,000.00 (20%) off my salary throughout the year

Now my inheritance generates that R600,000.00 - but that now puts me into a 40% tax bracket. So I'd need to pay the R240,000.00 (40%) tax my income AND the extra 20% on my salary which the company didn't know about ... so another R24,000.00?

So total tax for the year R288,000.00 and I'd have automatically paid R24,000.00 of that?
Click to expand...
No, it will be less than 40%.

On your return you will show all your Income (Salary + Inheritance). Depending on what you did with your inheritance would determine what portion would be taxable.

Remember that the inheritance should already have been subjected to Tax.

If you invest your portion, you will be taxed on the interest received and not the full R600k.

At 10% pa, it's R60k. That might push your total Income into a higher tax bracket (check the SARS tables) but it wil be closer to 30% than 40%.
 
Sorry - I was using the same figures as I did earlier ... so inheritance at R10million with R600,000kpa interest

If I add my interest R600,000.00 + salary R120,000.00 = R720,000.00

So being in the higher bracket (40%) I'd owe R288,000.00 to SARS - however my employee hasn't a clue about my inheritance and my marginal rate according to them would be 20% - which I've paid.

So surely I'd owe the balance?

* I'm using easy percentages and figures to get the simple idea in my head
 
Dolby said:
Sorry - I was using the same figures as I did earlier ... so inheritance at R10million with R600,000kpa interest

If I add my interest R600,000.00 + salary R120,000.00 = R720,000.00

So being in the higher bracket (40%) I'd owe R288,000.00 to SARS - however my employee hasn't a clue about my inheritance and my marginal rate according to them would be 20% - which I've paid.

So surely I'd owe the balance?

* I'm using easy percentages and figures to get the simple idea in my head
Click to expand...
Yes.
 
Yes if you have multiple incomes sources they will generally end up using a lower rate and thus you will have to pay in to SARS.
 
You have to register as a provisional tax payer and pay provisional tax twice a year - end Aug and end Feb on your non-PAYE income.
 
Rates tables:
INCOME TAX: INDIVIDUALS

Tax rates (year of assessment ending 29 February 2012)

Individuals

Taxable Income (R) Rate of Tax (R)
0 - 150 000 18% of taxable income
150 001 - 235 000 27 000 + 25% of taxable income above 150 000
235 001 - 325 000 48 250 + 30% of taxable income above 235 000
325 001 - 455 000 75 250 + 35% of taxable income above 325 000
455 001 - 580 000 120 750 + 38% of taxable income above 455 000
580 001 and above 168 250 + 40% of taxable income above 580 000
 
Dolby said:
Sorry - I was using the same figures as I did earlier ... so inheritance at R10million with R600,000kpa interest

If I add my interest R600,000.00 + salary R120,000.00 = R720,000.00

So being in the higher bracket (40%) I'd owe R288,000.00 to SARS - however my employee hasn't a clue about my inheritance and my marginal rate according to them would be 20% - which I've paid.

So surely I'd owe the balance?

* I'm using easy percentages and figures to get the simple idea in my head
Click to expand...

You would become a Provisional Taxpayer at that level of interest income.
 
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