When Finance Minister Enoch Godongwana tables his national budget on 23 February, South African taxpayers will learn about the latest tax regulations and measures for the upcoming year.<\/p>\n
Before then, it\u2019s worth reviewing five things every employer and employee should know about payroll tax and clearing up a few misconceptions about PAYE (employee tax).<\/p>\n
Many people still think that bonuses, overtime and commission are taxed at different rates to wages and salaries.<\/p>\n
However, all income is taxed at the same rate on the payroll according to the standard annual PAYE tax tables from SARS.<\/p>\n
There will, however, be a different code on the tax certificate to let SARS know what the payment is for.<\/p>\n
There are some exceptions. In the case of retrenchment, retirement or death, an employee benefits from a once-off R500,000 lifetime exemption for lumpsum payments.<\/p>\n
Your employer must apply for a directive from SARS to determine whether you have used the exemption before it can exclude such a payment from payroll taxes.<\/p>\n
There is a common misunderstanding that all income tax is levied at your marginal rate.<\/p>\n
However, in South Africa\u2019s progressive tax system, your remuneration is divided into different tax brackets.<\/p>\n
The first portion of your annual income is taxed at the lowest rate of 18% and subsequent portions are taxed at progressively higher rates up to a maximum of 45%.<\/p>\n
Based on the 2021\/2 tax tables, here\u2019s an example for someone who earns R450,000 a year, who would have a marginal tax rate of 31%.<\/p>\n
It\u2019s thus not true that a salary increase that pushes you into a higher marginal tax bracket will mean that you will pay tax across all of your income at a higher rate.<\/p>\n
If the person in our example gets an increase that takes their salary to R480,000 and their marginal rate to 36%, they only pay a tax rate of 36% on the R467,501 to R480,000 portion of their salary.<\/p>\n
There is no reason to fear that moving up a tax bracket will result in you taking less money home at the end of the month.<\/p>\n
If you do a lot of travel by car for work\u2014for example, to make deliveries or see clients\u2014your company may provide a car\/travel allowance to cover some of expenses.<\/p>\n
In general, the allowance covers the use of your own car, but you can still get an allowance if you\u2019re driving a company-owned vehicle.<\/p>\n
However, your use of the company car will be fully taxable.\u00a0 It should be reflected on the payroll as a taxable allowance rather than a travel allowance.<\/p>\n
A deduction for business travel will be permitted against the use of the motor vehicle fringe benefit on which the employee was taxed monthly.<\/p>\n
If the employee makes use of a company-owned petrol or garage card, in respect of a private vehicle, then the tax treatment on the payroll is the same as when the employee would receive a travel allowance.<\/p>\n
The only difference is that the allowance and the taxable amount may vary by month.<\/p>\n
According to section 40 of the Basic Conditions of Employment Act (BCEA), each employee working an eight-hour day and a five-day week is entitled to 21 consecutive days (15 working days) of paid annual leave.<\/p>\n
If you part ways with your employer, it must pay you out for any of these legally required leave days that you did not use.<\/p>\n
However, if your company gives you more leave days than the legal minimum, it is not required under the BCEA to pay you for the excess days you didn\u2019t use.<\/p>\n
Your employment contract might specify that the additional days will be paid out if you leave without using them.<\/p>\n
Note that you\u2019re not allowed to sell days of your minimum leave to your employer (work your leave days to get paid more money).<\/p>\n
You may sell leave days exceeding the 15 days of minimum leave back to your company.<\/p>\n