Tax Calculator

[^^vampire^^]

I've been trying to find a reliable tax calculator but all seem to give me a different result.

If I earn R35 000 gross and contribute R10 000 p/m to an RA with R2250 a month for medical aid - need to find out what the tax would be monthly.
No other costs would be influtential on this amount.

If anyone can help me that would be great.

 

[ClintZA]

Geez, making me work for free here!

Turning those into annual numbers we get the following:

Assuming no pension or provident fund, 15% of your gross income (R420,000) is allowable as an RA contribution which is tax deductible. This is an amount of R63,000pa. The rest would carry over to a year in which you do not claim your full benefit or increase your tax free lump sum at retirement.

You may claim R230 per month for your contributions to your medical aid (as well as R230 for an adult dependent and R154 for each additional dependent), so a total of R2,760 (assuming just you). You may then also claim medical expenses not covered by the medical aid, and contributions above the allowed deduction, by the amount paid by you in excess of 7.5% of your taxable income.

So based on this you get:

Income R420,000
Deductions
RA Contri R63,000
Med Aid R2,760
Taxable income R354,240 (monthly R29,520)
Tax Payable R74,816 (monthly R6,234)


I did it quick so any corrections welcomed I could have used the monthly tax tables but I had the annual ones on hand.

 

[ClintZA]

I'm sure you are interested in the benefit of the RA... I'm going to assume you only contribute the allowable tax deductible amount to the RA of R63,000 per annum below.

So without the RA:
Taxable income R417,240
Tax payable R96,866
Net income R320,374 (R26,697pm)


With the RA:
Taxable income R354,240
Tax payable R74,816
Net income R279,424 (R23,285pm)


So you are taking home only R3,412 less per month with the RA but you are investing an amount of R5,250 per month. Yes, we can get into a discussion about merely delaying the tax until retirement, as some will argue, but in the interim you are earning returns on an amount you have not been taxed on + you receive a tax free lump sum on a portion of your funds at retirement + there are preferential rates on your returns within the funds for RAs + there are preferential personal tax rates once you are over 65...

 

[werfie]

If you are looking for an online salary tax calculator, you can check this out:

http://www.pastelpayroll.co.za/Past...stel-Payroll-Software-Tax-Calculator-Page.asp

Didn't check them, but ClintZA's calcs seem pretty on the dot.

 

[ClintZA]

If you are looking for an online salary tax calculator, you can check this out:

http://www.pastelpayroll.co.za/Past...stel-Payroll-Software-Tax-Calculator-Page.asp

Didn't check them, but ClintZA's calcs seem pretty on the dot.

Damn, after all of that!

I just tried that calculator though and wondered why the numbers were not agreeing with mine and I see they do not limit the allowable RA contribution to 15% of your gross income. If you plug R30,000 into your RA contributions it shows you do not pay any tax. I wonder why?

 

[^^vampire^^]

Geez, making me work for free here!

Seem to be the only one really working nowadays

Thanks for the help! I suppose the numbers will change from March 2013 as the allowable RA contribution goes up to 22.5%?

 

[^^vampire^^]

Damn, after all of that!

I just tried that calculator though and wondered why the numbers were not agreeing with mine and I see they do not limit the allowable RA contribution to 15% of your gross income. If you plug R30,000 into your RA contributions it shows you do not pay any tax. I wonder why?

I found that calculator before, and although it seemed to be the most accurate I was also wondering why it wasn't capping the contribution. Was wondering if I was doing it all wrong or something.

 

[ClintZA]

Seem to be the only one really working nowadays

Thanks for the help! I suppose the numbers will change from March 2013 as the allowable RA contribution goes up to 22.5%?

Indeed. Remember though that at the moment it is 15% of NRFI (so income after taking into account any contributions to a pension or provident fund) whereas the 22.5% will be the total across all retirement funding (he says rushing off to double check ). But yeah, in the case of someone without any company retirement fund it would be 22.5%.

 

[^^vampire^^]

Indeed. Remember though that at the moment it is 15% of NRFI (so income after taking into account any contributions to a pension or provident fund) whereas the 22.5% will be the total across all retirement funding (he says rushing off to double check ). But yeah, in the case of someone without any company retirement fund it would be 22.5%.

Cool. I'm joining a new company in december but they have no benefits in place so I will be sorting out the medical aid myself (I'm the only member - R2250 p/m) as well as retirement so it will only be the RA (R8000 p/m) that I will be contributing to but the RA will only start in March.

 

[ClintZA]

<unashamed punt> Ha ha, feel free to use my broking services if you are on the look out... </unashamed punt>

 

[werfie]

I found that calculator before, and although it seemed to be the most accurate I was also wondering why it wasn't capping the contribution. Was wondering if I was doing it all wrong or something.

In practice the tax free amount for RA contributions isn't capped, purely because no employer can know what contributions are made privately not through the payroll, or if any limits were reached for instance at a previous employer you were employed at during the year, most payroll software systems "disregard" this limit and it is applied on assessment IIRC.

 

[^^vampire^^]

<unashamed punt> Ha ha, feel free to use my broking services if you are on the look out... </unashamed punt>

Cool will definitely keep that in mind Thanks for your help!

In practice the tax free amount for RA contributions isn't capped, purely because no employer can know what contributions are made privately not through the payroll, or if any limits were reached for instance at a previous employer you were employed at during the year, most payroll software systems "disregard" this limit and it is applied on assessment IIRC.

I see wasn't aware of this - thanks to you too for the help

 

[ClintZA]

In practice the tax free amount for RA contributions isn't capped, purely because no employer can know what contributions are made privately not through the payroll, or if any limits were reached for instance at a previous employer you were employed at during the year, most payroll software systems "disregard" this limit and it is applied on assessment IIRC.

The interesting thing is that the calculator refers specifically to retirement annuity contributions separate from pension fund contributions. It also seems to be aimed at the individual with reference to entering "your earnings and deductions". I reckon they have just not built in the RA deduction limits. I considered emailing them on the address provided but no benefit really in doing so.

If someone wanted their RA contributions to be deducted on a monthly basis they would need to approach their payroll people with proof of their contributions. Most are likely to be lazy about it and claim it cannot be done even though SARS allows for it

 

[^^vampire^^]

The interesting thing is that the calculator refers specifically to retirement annuity contributions separate from pension fund contributions. It also seems to be aimed at the individual with reference to entering "your earnings and deductions". I reckon they have just not built in the RA deduction limits. I considered emailing them on the address provided but no benefit really in doing so.

If someone wanted their RA contributions to be deducted on a monthly basis they would need to approach their payroll people with proof of their contributions. Most are likely to be lazy about it and claim it cannot be done even though SARS allows for it

Yeah I wanted to do this but thought they would give me the uphill...

 

[air]

Thanks for the help! I suppose the numbers will change from March 2013 as the allowable RA contribution goes up to 22.5%?

iirc, the 22.5% is 'live' from 01 March 2014, it is age dependent. I think people >=45 years old, can do 27.5%

edit - Retirement reforms will come into effect 1 March 2014 to encourage South Africans to save for retirement. Individual taxpayer deductions will be 22.5% (below 45 years) and 27.5% (45 and above) of the higher of employment or taxable income. Annual deductions will be limited to R250 000 (below 45 years) and R300 000 (45 and above), with a minimum monetary threshold of R20 000.

 

[mjwitter]

Geez, making me work for free here!

Turning those into annual numbers we get the following:

Assuming no pension or provident fund, 15% of your gross income (R420,000) is allowable as an RA contribution which is tax deductible. This is an amount of R63,000pa. The rest would carry over to a year in which you do not claim your full benefit or increase your tax free lump sum at retirement.

You may claim R230 per month for your contributions to your medical aid (as well as R230 for an adult dependent and R154 for each additional dependent), so a total of R2,760 (assuming just you). You may then also claim medical expenses not covered by the medical aid, and contributions above the allowed deduction, by the amount paid by you in excess of 7.5% of your taxable income.

So based on this you get:

Income R420,000
Deductions
RA Contri R63,000
Med Aid R2,760
Taxable income R354,240 (monthly R29,520)
Tax Payable R74,816 (monthly R6,234)


I did it quick so any corrections welcomed I could have used the monthly tax tables but I had the annual ones on hand.

Isn't the R230 a month meant to be a tax credit instead of a deduction before tax?

 

[ClintZA]

Isn't the R230 a month meant to be a tax credit instead of a deduction before tax?

As per the tax pocket guide :

DEDUCTIONS

Current pension fund contributions
....

Arrear retirement annuity fund contributions
....

Medical and disability expenses
• Taxpayers 65 and older may claim all qualifying expenditure.
• Taxpayers under 65 may claim all qualifying medical expenses where the taxpayer or the taxpayer’s spouse or child is a person with a disability.
• Other taxpayers under 65 may in determining tax payable deduct monthly contributions to medical schemes (a tax rebate to be known as a medical scheme fees tax credit) up to R230 for each of the taxpayer and the first dependant on the medical scheme and R154 for each additional dependant. When determining taxable income they can also claim a deduction for medical scheme contributions exceeding four times the amount of the medical schemes fees tax credits and any other medical expenses limited to the amount which exceeds 7.5% of taxable income (excluding retirement fund lump sums).

Donations
...

 

[air]

Isn't the R230 a month meant to be a tax credit instead of a deduction before tax?

that is my understanding. Checked SO's payslip, definitely, tax is reduced by R460 (2*R230) right at the end.

 

[ClintZA]

You guys are correct. Rather sad that the SARS pocket guide has it incorrect. Another guide more accurately shows the following:




Doing the OPs calculation again we then have:

Income R420,000
Deductions
RA Contri R63,000
No medical deductions, unless he paid for other medical expenses due to the 7.5% rule

Taxable income R357,000 (monthly R29,750)
Tax Payable R75,691 (monthly R6,307)
Less Medical Aid Credit R2,760
Tax owing R72,391

 

[ClintZA]

This is how the SARS guide (incorrectly) explains it:



The words "may in determining tax payable deduct monthly contributions to medical schemes up to R230 for each of the taxpayer" are misleading to say the least.