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Making sense of Personal Tax

South Africa has a progressive income taxation system, resulting in the wealthy contributing a greater proportion towards supporting the State than the poor. This means the higher the person earns, the more tax they pay. By law all employers have to register all employees as taxpayers regardless of their tax liability.

The history of Income Tax in SA

Income tax in South Africa was first introduced in 1914 with the introduction of the Income Tax Act No 28, an act that had its origins in the New South Wales Act of 1895.

Individual income tax also known as Personal Income Tax ranges from 18% (for income below R160 000 p/a) to 40% (for amounts over R617 000), although the tax threshold of R73,650 (for persons below age 65) means that anyone earning less than this amount pays no income tax.

No need to declare

If you earn less than R73,650 (2015) a year, you don’t need to declare your income and don’t need to submit an income tax return as long as your remuneration is from a single employer, their remuneration is for the full tax year and no allowance was paid, from which PAYE was not deducted in full with regards to travel allowance..

Personal Income Tax raised on 1st of April 2015

Personal income tax rates were raised by one percentage point for all taxpayers earning more than R181,900 a year from the 1st of April 2015.  This raised tax by R21 a month for a taxpayer below the age of 65 with an annual income of R200,000. Those earning R500,000 pay R271 a month more, and at R1.5 million a year the tax increase is R1105 a month.”

The net effect is that is tax relief below about R450,000 a year, while those with higher incomes pay more in tax.

In Summary – who is liable to pay personal income tax:

You are liable to pay income tax if you earn more than:

For the 2015 year of assessment (1 March 2014 – 28 February 2015)

  • R70 700 if you are younger than 65 years.
  • If you are 65 years of age or older, the tax threshold (i.e. the amount above which income tax becomes payable) increases to R110 200.
  • For taxpayers aged 75 years and older, this threshold is R123 350.

For the 2016 year of assessment (1 March 2015 – 29 February 2016)

  • R73 650 if you are younger than 65 years.
  • If you are 65 years of age or older, the tax threshold (i.e. the amount above which income tax becomes payable) increases to R114 800.
  • For taxpayers aged 75 years and older, this threshold is R128 500.

If you’d like a personalised service to take care of your own personal income tax, contact our tax department and we’ll discuss how we can assist you.

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