A quick guide on taxes payable for tax year 2018/2019 and 2019/2020 in SA.
Definition of taxable income: This is the amount used to calculate the amount of taxes an individual, company and/or a trust must pay over to SARS. Another way to express this is the total income less all deductions with the balance being taxed according to the below table:
|Individuals and special trusts|
|Taxable Income||Tax rate|
|0 – 195 850||18% of taxable income|
|195 851 – 305 850||35 253 + 26% of taxable income above 195 850|
|305 851 – 423 300||63 853 + 31% of taxable income above 305 850|
|423 301 – 555 600||100 263 + 36% of taxable income above 423 300|
|555 601 – 708 310||147 891 + 39% of taxable income above 555 600|
|708 311 – 1 500 000||207 448 + 41% of taxable income above 708 310|
|1 500 001 and above||532 041 + 45% of taxable income above 1 500 000|
|· Trusts except special trusts: rate of tax 45%
· Trusts are taxed at a flat rate of 45% on taxable income
· Companies, other than small business corporations are currently taxed at 28% on taxable income
Individuals are granted a rebate against the amount of taxes calculated as above. (The rebate or a portion of the rebate is not refundable to a taxpayer, rather, it is set off against their tax bill as calculated above.
|Tax year 2018/2019||Tax year 2018/2019|
|Primary rebate (under 65 years of age)||14067||Primary rebate (under 65 years of age)||14220|
|Secondary (If 65 or older during assessment year)||7794||Secondary (If 65 or older during assessment year)||7794|
|Tertiary (If 75 and older during assessment year)||2601||Tertiary (If 75 and older during assessment year)||2601|
|Tax threshold (If earnings are under this amount, it means that there are no taxes on earnings for assessment year|
|Under 65 (R14067 * 100/18)||78150||Under 65 (14067 * 100/18)||79000|
|65 and older (R14067 + R7713) * 100/18||121000||65 and older (R14220 + R7794) * 100/18||122300|
|67 and older (R14067 + R7713 + R2574) * 100/18||135300||67 and older (R14220 + R7794 + R2601) * 100/18||136750|
Exemptions from income tax
Exemptions means that income is included and then exempted which means that income is effectively not subjected to taxes.
This exemption is for locally earned interest by a South African resident from a source within South Africa. Interest earned through a tax-free investment vehicle is fully exempt but still needs to be declared when a return is filed. This interest will be exempted over and above the below exemption amounts.
|Tax year 2018/2019||Tax year 2019/2020|
|Persons under 65 during assessment year||R23800||Persons under 65 during assessment year||R23800|
|Persons 65 years of age and older||R34500||Persons 65 years of age and older||R34500|
These interest exemption amounts are unlikely to be increased as it is preferred that an individual uses a tax-free investment for any additional interest earnings.
Local dividends or foreign dividends with dual listing (another country and South Africa) are exempt from income taxes as they would have already been taxed by the imposition of taxes on the company’s taxable income at a rate of 28% (Unless the rate changes or the company is classified as a small business corporation or a personal service provider) as well a further 20% dividend withholding tax on a dividend distributed. As such, the income has already been taxed and is received by an individual taxpayer as exempt income.
Foreign dividends – The amount is included as income when filing a return and is subject to taxes up to a rate of 20% (Less any credits paid in the foreign country) when shareholding is less than 10% of the company distributing these dividends. No deductions may be claimed against this income, on the credits paid to the foreign tax authorities)
Capital gains – due to the disposal, sale, immigration, death, donation or exchange.
How this works: Any gain, other than gains that qualify for exclusion, should be disclosed when filing an income tax return. However, the full amount of the capital gain is not included as gross income. For individuals 40% is included while for companies, 80% of the capital gain is included as gross income. Individuals and special trusts, not companies, also qualify for an annual exclusion of R40 000 against any capital gain prior to the 40% inclusion to gross income.
|Item||Individual / Special trust||Company|
|Less base cost (Cost of asset)||-20000||-20000|
|Inclusion amount (40% and 80%)||24000||80000|
|Tax on gain (41% assumed and 28%)||9840||22400|
If a dividend were to be distributed, a further 20% dividend withholding tax would be imposed. In the case of a small company, not a small business corporation as defined, where the amount is paid to the shareholder as a salary, the tax margin amount would be used which ranges from 18% to 45%.
The above illustration demonstrates the taxes on capital gain without reference to the effective tax rate on capital gains as the effective rate would depend on the tax margin of the company, individual or special trust.
Some exclusions are as follows:
- The first R2 million for a primary residence (exclusion means that a profit or loss is excluded)
- Some personal use assets
- Amounts in a retirement fund vehicle
- 8 million for the sale of a small business with a market value of under R10 000 and only if the individual has attained the age of 55.
- The R40 000 annual exclusion is increased to R300 000 during the year of a taxpayer’s death.
Lumpsum withdrawals from retirement funds for death, retirement or retrenchment as defined:
|Lifetime withdrawals||Tax imposed on amount|
|R1 – R500 000||0% of taxable withdrawal|
|R500 001 – R700 000||18% of taxable withdrawal amount exceeding R500 000|
|R700 001 – R1 050 000||R36 000 + 27% of taxable withdrawal Amount exceeding R700 000|
|R1 050 001 and above||R130 500 + 36% of taxable withdrawal exceeding R1 050 000|
|In the case of early withdrawals, the below table is used|
|Lifetime withdrawals||Tax imposed on amount|
|R1 – R25 000||0% of taxable withdrawal|
|R25 001 – R660 000||18% of taxable withdrawal amount exceeding 25 000|
|R660 001 – R990 000||114 300 + 27% of taxable withdrawal amount exceeding 660 000|
|R990 001 and above||203 400 + 36% of taxable withdrawal amount exceeding 990 000|
With regards to withdrawals made from a retirement fund, the above table is a lifetime table. Therefore, if an amount is withdrawn and a few years later a second withdrawal is made, the first withdrawal is taken into account in determining the amount payable on the second withdrawal. Also, where a person is retrenched and uses the full exemption of R500 000, upon retirement, this amount is taken into account along with all past withdrawals to determine the rate of tax on such additional withdrawal.
Pension, provident and retirement annuity contributions – An amount of up to 27.5% of an individual’s taxable income but with a limit of R350 000 per annum. (Excluding any lumpsum amounts and capital gains)
Any amounts paid by the employer constitutes a fringe benefit which means that such amount is included as income in the hands of the taxpayer and may then be considered as a deduction once the return is submitted.
Medical aid – Medical aids no longer qualify as a deduction against income but qualifies as a credit against tax payable for the year. (This is called a medical scheme tax credit) For tax year 2018/2019 and 2019/2020, an amount of R310 is granted for the first 2 members on the medical aid per month and a further R209 is granted for each additional dependant thereafter.
Additional tax credits are granted only where a taxpayer’s contributions to a medical scheme and out of pocket expenses exceed 7.5% of taxable income as well as 4 times medical credits. This may be complicated to understand, click here for more information.
In the case of an individual with a disability, as defined, or a person that is over 65 years of age or who has attained the age of 65 at any time during the year of assessment, additional medical credits are calculated differently. Total medical contributions and the total amount of medical expenses paid by the taxpayer must be added and from this amount 3 times medical credits are to be deducted. The balance is to be multiplied by 33.3% and this amount would form additional medical tax credits which may be offset against that taxpayer’s tax bill for the year.
The person paying the medical may claim the benefit. As such, the correct person in the family should deduct the amount and this also means that a medical bill not paid does not qualify as a tax deduction.
Employer provided vehicle – Prior to any deduction, the employer must first include as income an amount for the use of the company car. This is known as a fringe benefit. The inclusion rate is either 3.25% (with a maintenance plan) or 3.5% (with no maintenance plan) of the vehicle’s determined value including VAT for each month the employee has use of the vehicle. This amounts to either 39% or 42% of the value of the vehicle is to be included as income by the employer to the individual using the company car where the employee used the vehicle for the full year of assessment.
A company leased vehicle works differently in that the employer is to include the full rental paid and all fuel cost as the fringe benefit.
Where an individual maintains a proper logbook, which meets SARS criteria the freeing benefit in either of the above 2 situations may be reduced in the ratio that the vehicle was used for private and business use.
While employers generally tax this benefit at their 20%, 80% or 100%, the full amount, either 3.25% or 3.5% or rental costs and fuel, should be included as income in the hands of the individual with this benefit.
Subsistence allowances – Paid to an employee that is required to stay at least 1 night or more away from their normal palace of residence for business. As this is only a guide and not an article about this specifically, we are not able to go into large details. However, if a person is required to stay in another place for an extended period, SARS may argue that the normal place of residence has moved and that the elements of granting a subsistence allowance is lacking. If this is contested by SARS, the claim may be disallowed. This could particularly be the case when working in another country and remaining principally there as the ordinary residence may then having moved, invalidating any subsistence claim.
|Tax year 2018/2019||Tax year 2019/2020|
|Local travel incidental costs only||128||Local travel incidental costs only||134|
|Local travel meals and incidental costs||416||Local travel meals and incidental costs||435|
Foreign travel rates – Based on table published stating the country and the currency used for that country. This amount needs to be converted to a South African equivalent.
Travel allowance – When an employee is to use their own vehicle for business reasons. This below table may only be used when claiming against a travel allowance granted to an employee and not against an independent contractor, commission or a sole proprietorship. When a claim is made using this table, it is referred to as the deemed cost method.
|Tax year 2018/12019||Tax year 2019/2020|
|Value of vehicle (Inc VAT)||Fixed cost||Fuel cost (Cent per km)||Maintenance (Cent per km||Value of vehicle (Inc VAT)||Fixed cost||Fuel cost (Cent per km)||Maintenance (Cent per km|
|R0 – R85 000||38352||0,957||0,344||R0 – R85 000||38352||0,957||0,344|
|R85001 – R17 0000||50631||1,068||0,431||R85001 – R17 0000||50631||1,068||0,431|
|R170001 – R255 000||77983||1,160||0,475||R170001 – R255 000||77983||1,160||0,475|
|R255001 – R34 0000||92683||1,248||0,519||R255001 – R34 0000||92683||1,248||0,519|
|R340001 – R425 000||112443||1,335||0,609||R340001 – R425 000||112443||1,335||0,609|
|R425001 – R510 000||133147||1,532||0,716||R425001 – R510 000||133147||1,532||0,716|
|R510 001 and above||153850||1,584||0,889||R510 001 and above||153850||1,584||0,889|
For information on travel allowances, please click here.
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