How many days you spend working to pay tax every year
With tax season now in full swing, Citadel has released a breakdown of how long the South African’s are having to work, just to pay off the taxman.
Assuming that you do not work on weekends or on public holidays then you have 250 work days for which you will be paid this year, says Paul Leonard, regional head of Citadel in the Eastern Cape.
This excludes annual leave, which are days for which you are paid despite not being at work.
According to Leonard, if you earnR10,000 per month, or R120,000 this year, then you will pay around R7,900 in tax this year – effectively 17 of your working days have been spent working for government.
At an income of R25,000 per month or R300,000 this year you will spend 41 of your work days working to pay just short of R50,000 in tax.
If you earn R50,000 per month or R600,000 this year you will pay just over R153,000 in tax and it will have taken you 64 of your working days.
“In other words you would have worked until Friday the 31st of March to pay your income tax,” Leonard said.
If you earn a R100,000 per month then you will spend 83 of your 250 working days this year to pay just short of R400,000 (R396,990) in income tax.
The number just keeps increasing Leonard said, with those earning between R1.14 million and R4 million only completing their tax days sometime in May.
“People earning more than R4 million in taxable income this year will spend at least 103 of their 250 working days to pay income tax and will have finished working to pay their taxes in the first two weeks of last month.
“By the 14th of June everyone, including those with ultra-high incomes, will have finished working to pay income tax,” he said.
People who earn under the tax threshold of R75,750 a year (R6,300 a month) pay no tax and they don’t spend any time working for the government.
Retirement annuities
One of the ways you can reduce the amount of tax working days is by contributing to a retirement annuity (RA), said Leonard
“If, for example, if you earn R50,000 a month, you will have 64 tax working days – but if you put 15% of your taxable income into a retirement fund, like a retirement annuity, then you will reduce your tax days from 64 to 50 tax days. That is a reduction of 14 working days.”
Because this does not include weekends, in reality this is closer to a reduction of 3 weeks.
“To put it differently, in this example, contributing 15% to a retirement annuity reduces your tax work days by 22% because you have reduced your income tax by 22%.”
According to Leonard, you are currently able to contribute 27.5% of your taxable income towards a retirement annuity, which is limited to R350,000 for the year.
“This is a great example of where it is valuable to pay yourself first using retirement funds – as this case shows, if you earn R50,000 a month you could cut the amount of time you spend working for the taxman by a whole month.”
Notes:
2017/18 tax tables for a tax payer below age 65
* Work Days exclude weekends and public holidays (2017 calendar year)
** Maximum contribution of R350,000 pa has been reached
§ Tax Free date is the last day on which tax is paid
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