Business Opinion

Extra R9,300 per month ‘tax’ for the average person living in South Africa

Malcolm Libera

 ·9 Jun 2026

The average South African earning R30,000 a month could be paying almost half of their income to the government and related compulsory charges.

According to Sean Kelly, director at Parity Wealth Managers, most taxpayers focus only on Pay-As-You-Earn (PAYE) deductions and overlook the many indirect taxes and compulsory costs that steadily erode their disposable income.

In an interview with 702, he explained that while someone earning R30,000 a month, or R360,000 a year, may believe they are paying an effective tax rate of around 20% through PAYE, the reality is far different once other taxes and charges are considered.

One of the biggest contributors is VAT, which applies to a wide range of goods and services purchased daily.

Kelly noted that households pay VAT on restaurant meals, electricity, clothing, household goods and numerous services.

“VAT alone is 15%, meaning households are constantly paying additional tax on everyday spending,” he said.

Using the example of a household spending around R5,000 a month on groceries, Kelly estimated that annual spending of R60,000 would generate roughly R9,000 in VAT payments. 

“If you’re spending R2,000 a month on fuel, indirectly you pay roughly R7,500 a year on fuel levies,” he said.

Beyond these direct and indirect taxes, economists argue that South Africans effectively pay a second layer of costs because many public services fail to meet expectations.

Efficient Group chief economist Dawie Roodt added that expenses such as school fees, private security and medical aid can be viewed as an additional “tax” on households.

This is because citizens often pay privately for services that should be adequately provided through taxation.

MyTreasury co-founder Michael Kransdorff similarly argued that shortcomings in state-provided education, healthcare and policing force many South Africans to seek private alternatives at their own expense.

Applying these costs to a person earning R30,000 a month adds to the pain.

The real tax rate South Africans pay

The average cost of a former Model C (fee-paying public) school in South Africa typically ranges from R36,000 to R75,000 per year. This works out to at least R3,000 a month.

A basic medical aid such as Discovery Health (Essential Smart) costs R2,161 per month. This includes unlimited network hospital cover and basic primary care at specified hospital and GP networks.

The cost of private security in South Africa varies widely depending on the service level. Standard armed response averages R475 per month.

Housing-related charges further reduce disposable income. Banking guidelines indicate that housing costs should not exceed 30% of gross monthly income.

This means that someone earning R30,000 a month could typically qualify for a home valued at around R900,000 in the City of Tshwane.

Tshwane provides a R250,000 valuation reduction exemption for residential primary properties. You only pay rates on the remaining R650,000 value of your home.

After accounting for the municipality’s residential rates rebate, property rates on such a home would amount to roughly R635 a month.

Refuse removal for a standard 240L municipal bin costs about R389 monthly, while VAT on R1,000 worth of electricity adds around R130.

Sewerage charges for a typical household using 15 kilolitres of water a month would add another R252 to the bill.

At the end of it, a person earning R30,000 a month is left with R15,454.21, which translates to an effective tax rate of 48.49%. Excluding PAYE, this works out to an extra ‘tax’ of R9,318.67 a month.

“And that’s before we consider investment taxes, transfer duties and estate tax,” Kelly said. He added that this helps explain why many South Africans feel significantly poorer than their payslips suggest.

“To be fair, it’s not exclusive to South Africa. Indirect taxes are obviously a global thing,” he said. At the same time, he warned that bracket creep is placing additional pressure on workers.

This occurs when salary increases meant to keep pace with inflation push taxpayers into higher tax brackets without materially improving their purchasing power.

With households facing rising costs for fuel, groceries, school fees, medical aid, insurance and electricity, Kelly said comprehensive financial planning has become increasingly important.

“Retirement annuities are one of the most effective tax tools because contributions are tax-deductible,” he said.

He also described tax-free savings accounts as “extremely valuable because all growth and withdrawals within them are completely tax-free.”

Kelly added that many South Africans neglect estate planning, despite estate duty ranging from 20% to 25%.

“Unfortunately, we’ve seen it often where people don’t have those structures in place, and by the time they pass away, it is too late,” he said. 

“Financial planning is no longer about just investments. It’s also about long-term tax efficiency.”