Tax and 13th cheque

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Frikkie5000

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How does taxation on pro-rata 13th cheques normally work?

I started working here 3 months ago and organised that I pay the tax on my guaranteed 13th cheque throughout the year. They taxed me for the past three months as if I was going to get a full 13th cheque but still only gave me a pro-rata one (1/4 th of my 13th cheque). This is pretty lame as I ended up paying an extra R5200 worth of tax over 3 months on a R6500 13th cheque.

Is this common practice or are the payroll people being lazy? Will I be able to some of the tax back come tax return time?
 
Yup, Payroll people being lazy. Yes you will get everything you paid too much back when you submit your tax return. Will be a nice little chunk of extra cash at that time.
 
Tax on bonus provision is based on a full twelve months. That said, as MickeyD mentioned, you should get it back next month as your PAYE on your payslip will likely be a negative or at least greatly reduced. They would just need to a tax adjustment.
 
I'm not entirely sure how to calculate the tax on my 13th cheque.

Is it simply taking your 12 month taxable earnings and adding the 13th cheque to get the new taxable total?

For example. Let say you earn R312 000 a year. This means you'll pay roughly R4500 tax a month according to the Sars tax tables. But if you get a guaranteed 13th cheque of R26 000 it means your taxable income is actually R338 000. If you were to pay your tax on your 13th cheque monthly throughout the year you'd be paying R5200 a month, instead of R4500 a month.

Is this actually how it works? Because if it is these payroll people are taxing the crap out of me. If I take my full taxable earnings (including the 13th cheque) I'm still paying significantly more than the tax table says I should. My tax has been R6700 which means I should be earning closer to R400k, 13th cheque included, which I'm not.

This means I effectively paid like R4500 worth of tax more even if I calxulated it based on the full 13th cheque. Either I don't understand how to calculate tax or these payroll fuys are screwing up royaly.

:-(
 
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Tax on R312k pa = R 54 706.00 -- / 12 = R4558
Tax on R338k pa = R 62 766.00 -- / 12 = R5230.5

Therefore total tax paid on R26k bonus equates to R8060. (Would have been R700 a month).

So what probably happened is their payroll software is stupid and assumes your monthly salary = R338k / 12 and thus paid tax this month on the higher total.

When you submit your tax return next year you can claim it back.
 
requiem said:
Tax on R312k pa = R 54 706.00 -- / 12 = R4558
Tax on R338k pa = R 62 766.00 -- / 12 = R5230.5

Therefore total tax paid on R26k bonus equates to R8060. (Would have been R700 a month).

So what probably happened is their payroll software is stupid and assumes your monthly salary = R338k / 12 and thus paid tax this month on the higher total.

When you submit your tax return next year you can claim it back.
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That sort of makes sense, but even then I should be paying a max of R6000. No matter how I slice and dice my taxable salary I can't get to a point where I have to pay R6700 for three months. I'm seriously starting to wonder if they're not taxing me on my total package and not my taxable earnings.
 
Frikkie5000 said:
TI'm seriously starting to wonder if they're not taxing me on my total package and not my taxable earnings.
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That doesn't sound possible.
Remember you are taxed on more than just your taxable earnings though. There are taxable company contributions and taxable fringe benefits to include along with tax deductible deductions to subtract.

Do you know what payroll system your company uses?
 
froot said:
That doesn't sound possible.
Remember you are taxed on more than just your taxable earnings though. There are taxable company contributions and taxable fringe benefits to include along with tax deductible deductions to subtract.

Do you know what payroll system your company uses?
Click to expand...

Don't have the foggiest idea what they use. I only get this old-school looking printed out payslip that says paid by Magnetic Tape Service. On my payslip it gives me my (1) "Taxable Earnings" = my gross after their contribution to medical aid and provident fund, (2) "Post-Tax Deductions = my contribution to my medical aid, provident fund and UIF and then (3) my PAYE which is way higher than it should be if I look up my taxable earnings on the SARS tables (even with my full 13th cheque included).

I asked them and they just shrugged and said the computer calculates it, so it must be correct. If I don't get a clear explanation from them today I'm escalating this to the head of the department.
 
Frikkie5000 said:
Don't have the foggiest idea what they use. I only get this old-school looking printed out payslip that says paid by Magnetic Tape Service. On my payslip it gives me my (1) "Taxable Earnings" = my gross after their contribution to medical aid and provident fund, (2) "Post-Tax Deductions = my contribution to my medical aid, provident fund and UIF and then (3) my PAYE which is way higher than it should be if I look up my taxable earnings on the SARS tables (even with my full 13th cheque included).

I asked them and they just shrugged and said the computer calculates it, so it must be correct. If I don't get a clear explanation from them today I'm escalating this to the head of the department.
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Magtape simply means your salary is paid using a Bankserv-based ACB.

Yeah, your payslip does sound old-school.
The PAYE should be and is being calculated by the payroll system.
Your payroll manager should be able to tell you (for the current month, say) what the taxable amount is on each of your earnings, cc's and fringe benefits.
 
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