Tax guide for salary earners (IRP5)

Introduction

Tax is compulsory for most people. No if's or but's. And besides, this deduction from your salary each month (which is paid to SARS), goes towards the development & management of our country. Important things like basic education, water & sanitation, hospitals, the police force, the upkeep of our roads & street lights - are all items that your tax payments go towards funding.

What income of mine is taxable? Here are some examples:

• Remuneration, i.e. income you get from being employed. This includes salaries, wages, bonuses, overtime pay, taxable (fringe) benefits, allowances and certain lump sum benefits
• Profits from a business or trade
• Income or profits that you receive from being a beneficiary of a trust
• Director's fees (if you're the Director of a company)
• Investment income, such as interest and foreign dividends (after exemptions)
• Net rental income on any properties you own (i.e. after deducting rental expenses)
• Income from royalties
• Annuities
• Pension income
• Certain capital gains, like when you sell a property or investment

Do I need to pay tax?

You're required to pay income tax if your taxable income for the tax year exceeds the following amounts:

Year of assessment ending February

What kind of taxpayer am I?

I am a salary-only taxpayer

Your salary is your main form of income and your employer pays your tax for you. You may earn some investment income, or rental income, but it falls below the threshold to register as a provisional taxpayer.

This means that you don't need to register for provisional tax and you'll submit only an ITR12 return each year. Let TaxTim help you complete your tax return correctly and get your maximum allowable tax refund. Sorted.

I am a provisional taxpayer

Not sure if you're a provisional taxpayer or not? There are a few aspects that make you a provisional taxpayer, including owning your own sole proprietor or freelance business - use our handy decision tree to see if you are one or not. If you're a provisional taxpayer and have not registered as a provisional taxpayer, then you need to do so asap!

Refer to our provisional tax guide to learn more about provisional taxes (and don't worry if it sounds overwhelming, TaxTim will ask you all the right questions, so that you complete your tax return correctly).

How do I calculate my earnings after tax?

If you're an employee, you probably negotiated your salary based on the gross amount (or cost to company) — which is the whole amount paid by your employer. Since income tax is deducted from this gross amount, often taxpayers don't know the net amount that will clear into their bank account each month.

SARS charges an employee tax monthly and employers must pay that amount over to SARS every month. This tax is called PAYE (Pay As You Earn) and it's calculated based on your taxable income. Your employer keeps the PAYE from your salary and pays it over to SARS on your behalf.

This is different to your gross income and is calculated as follows:

Sometimes your gross salary includes a pension fund contribution (for when you retire) and a travel allowance too (to help you pay for work-related transport). SARS does allow you to deduct your retirement fund contributions up to a certain limit from your gross salary. Only 80% of your travel allowance is included in taxable income, so we therefore also subtract 20% to calculate this value.

Your tax rate

Once you know what your taxable income is, you need to look at the SARS tax tables to find the income tax bracket that you fall into (your tax rate). People have different tax rates based on how much they earn: higher earners fall into higher income tax brackets than lower income earners, meaning that they pay a larger portion of their salary or income over to SARS.

Try the above calculation on your own and then look at the SARS website for their tax tables, or just use our easy income tax calculator which does all the difficult calculations for you.

Tax deductions

For most people who earn a salary from their employer, they have already paid their taxes in the form of Pay-As-You-Earn (PAYE). Although salaried employees are limited by tax law in terms of what they can deduct from their income, there are a few things that can be claimed back, reducing how much tax you owe to SARS. These allowable tax deductions are:

Retirement fund contributions

Your contributions towards retirement funds are tax deductible up to a limit of 27.5% of whichever is greater: your taxable income or remuneration (to a maximum of R430,000 per year). This limit applies to the total contributions you make to any Pension, Provident or Retirement Annuity (RA) fund during the year. The tax deduction will always be limited to the actual contributions you made, not the 27.5% taxable income limit.

Travel

Depending on your type of remuneration structure, you may be able to claim a travel deduction. Remember that you must keep an accurate and detailed logbook of all business travel, as well as a record of your vehicle expenses. The opening and closing km's for the tax year, as well as all the km's you travelled purely for business reasons must be recorded. Also keep the purchase contract which reflects the details of the car you've used.

Donations to PBOs

Donations paid to registered Public Benefit Organisations are tax deductible up to a maximum of 10% of your taxable income. Any disallowed donations exceeding this threshold can be carried forward and deducted the following year, subject to the same limit. SARS will only allow the deduction if the charity has a PBO number and can issue you with a section 18A tax certificate.

Wear & Tear on work assets

These include things like computer equipment, mobile phones and machinery (not your car). If you're using a device purchased and maintained in your personal capacity for work, you may be able to claim the depreciation on the device as a tax deduction. Check out our handy online Wear and Tear calculator to see the SARS approved rates.

Home office expenses

If you're a salaried employee but work mainly from home in a specifically dedicated space (e.g. a study or office area not used for any other purpose), you may be able to claim certain running costs associated with that space. Use our home office decision tree to see if and what you qualify to deduct, and our handy home office calculator to work out the amount you can claim.

Amounts refunded (s11(nA) and s11(nB))

This is a less commonly claimed deduction. An example would be if you were in breach of an agreement with your employer and were asked to pay back a benefit you received from them like a bonus, maternity leave benefit or bursary. If this amount has already been taxed, you could claim this deduction to reverse the tax already paid on it.

Legal costs

You may claim legal expenses incurred for any claim that is directly related to your salary package, such as a CCMA case where the claim will, as a result of a court order, be included in your income. The related income must be included in your taxable income and therefore have been taxed.

Bad debts

A bad debt is an amount that you were due to receive as income, but never did. In order to claim a bad debt expense, the amount that was due to be paid to you, but was never received, must reflect on your IRP5.

Medical expenses

Medical expenses are treated differently — they are not deducted directly off your taxable income. Instead, a portion of your qualifying medical related spend is converted to a 'tax credit', which is deducted from your overall tax liability. The medical tax credit is made up of two parts: medical aid contributions and out-of-pocket medical claims (see below).

Medical aid contributions

For those who contribute to a medical aid or hospital plan each month, you will receive a Medical Tax Credit (MTC). This is a fixed monthly tax credit for each member on your policy, which is deducted from your personal payable tax. As of tax year 2027, a South African taxpayer is permitted a medical tax credit of R376 for the primary member, another R376 for the first adult dependant and an additional R254 for each dependant after that.

To claim: You will need your Medical Tax Certificate to claim for medical aid contributions — you are usually sent this by your medical aid. This tax credit applies only to registered medical aid funds — medical insurance or GAP cover don't count.

Out of pocket medical claims

These are for 'qualifying' expenses that you've paid for yourself, which have not been reimbursed from your medical aid. Qualifying medical expenses include all consultations with medical practitioners, as well as doctor prescribed medication. SARS applies a complicated formula to determine your 'additional medical expenses tax credit'. The formula they use depends on your age and if you or your dependants have a disability.

If you're disabled or 65 years and older, you will receive an 'additional medical expenses tax credit' for all of your 'out-of-pocket' claims, provided you have all the relevant documentation as back-up. If you're suffering from a disability, make absolutely sure that you have completed an ITR-DD form which has been signed off by your doctor within the past 10 years if the disability is permanent and 1 year if the disability is temporary.

Taxpayers who are under 65 years old and have no disability will only receive the 'additional medical expenses tax credit' for out-of-pocket claims if their total qualifying medical expenses are greater than 7.5% of their total income.

To claim: Keep all the relevant documentation i.e. invoices and receipts as proof of your out-of-pocket medical expenses. Without the supporting documentation, you have no claim!

Why should I file my tax return?

SARS has announced that if you earn less than R500,000 a year, and fulfil a series of complicated criteria, you may not have to file a tax return. However, it's extremely important to understand this properly, because if you don't, you may be fined heavily in future. Here are five reasons why you should not skip filing your tax return this season:

1. You miss out on your refund. Why let SARS hold on to your money if you're owed a refund? If you've overpaid on your taxes, this money belongs to you. However, you can only be paid a refund if you file a return! Something as simple as claiming medical expenses or working two jobs can trigger a tax refund, depending on your financial situation.
2. You may not be able to borrow money. If you need to take out a mortgage for a new home, get a loan to start a business or pay for your child's education, you may need a Tax Clearance Certificate. You can only get this if all your returns are up to date and filed properly.
3. SARS might change their minds. If you normally submit a tax return, but this year you don't, SARS could make you pay administrative penalties in future, because you were not compliant.
4. You may not be able to access your retirement savings. Filing a tax return every year means that if you receive a payout from a fund, then you will receive that money without hassles or hold ups. If you retire or are retrenched, or just need to take money out of your fund early, you need to be tax compliant.
5. A complete record stands you in good stead. Having an unbroken filing record gives SARS officials no reason to suspect that you're hiding information from them. Filing a tax return also means that you're being a good citizen and contributing towards society!

When should I submit my tax?

SARS usually notify us of all filing dates closer to July each year.

If you don't submit your income tax return on time, you may be liable for admin penalties. SARS can charge an administrative penalty which can range from R250 to R16,000 per month, or R3,000 to R192,000 per year. It does appear though (at the moment), that SARS is issuing smaller penalties ranging between R500 and R2,000 per month, but we never know when this could change. The simplest way to avoid SARS issuing a penalty for outstanding returns would be to file your tax return each year, well before the deadline. Rather be safe than sorry.

How to submit your tax return

Once you have a SARS issued tax reference number (this will be a 10 digit number starting with a 0, 1, 2 or 3) you can get started using TaxTim. Here's how:

1. Visit www.taxtim.com/za and register
2. Answer our simple questions about your tax year
3. Let us fill in your tax return for you instantly

Now that you've completed your tax return, there are three simple ways to submit it to SARS:

1: Easy one-click filing

If you used TaxTim to complete your tax return, benefit from quick and easy one-click electronic filing, sending your return straight to SARS (we'll do it for you!)

2: Submit online via the internet and eFiling

Haven't registered for eFiling yet? Read how to register for SARS eFiling.

1. Log on to your eFiling profile and open the correct ITR12.
2. Copy everything from the tax return we generated into your blank ITR12 on eFiling.
3. Complete any missing personal info.
4. File your tax return on eFiling and it will be sent to SARS.
5. Wait for feedback regarding the status of your tax return and any applicable refunds.

3: Manual submission

Option 1: Call SARS to schedule an appointment. Please refer to https://www.sars.gov.za/contact-us/branch-finder/ to confirm the closest branch to you. Visit the SARS branch at the specified date and time. You need to take all the supporting documents with you, plus a certified copy of your ID and proof of address. A SARS tax consultant will assist you in submitting your return.

Option 2: Go to the SARS webpage https://tools.sars.gov.za/SARSeBooking to arrange an online appointment. Complete all your information and select "Submit my tax return" as the reason. SARS will give you a case number to submit supporting documents (including a certified copy of your ID and proof of address) before the date of appointment.

Tax documents

Below is a list of documents you'll need to retain for your records in order to support the amounts on your tax return and submit it to SARS. It's important that you keep these documents for at least five years from the date you receive your tax assessment (ITA34), as you may be audited.

IRP5

An IRP5 is an employee's tax certificate that will be issued to you at the end of each tax year detailing your salary, benefits, deductions and related taxes. All of this information needs to be reflected on your tax return.

Other income certificates (IT3b)

These include certificates you received for local interest income you earned, usually from the bank or the institution where you have your money invested. Any other documents relating to income received or accrued also need to be filed in a safe place.

Medical aid tax certificate

This certificate details exactly how much you paid to the medical aid for yourself and your dependents over the course of the tax year (1 March to end Feb). It also details how much money you paid for other medical expenses which you claimed for, but your medical aid did NOT cover.

IT3(f) — retirement annuity contribution certificate

A certificate issued by your retirement fund administrator confirming the contributions you made to the fund during the tax year. Only relevant for Retirement Annuity funds (not Pension or Provident Funds). Include the total contributions as reflected on your tax certificate and SARS will calculate how much you can claim.

Travel claim

A detailed logbook and other documents related to business travel expenses, as well as your vehicle purchase contract.

S18A donations tax certificates

A certificate issued by the PBO which reflects their PBO number, as well as the date and amount of the contribution you made.

Wear and tear

A letter from your employer stating that you can use the asset for work purposes, proof of purchase (invoice) and a calculation showing how the wear and tear was calculated and apportioned between business and personal use.

Home office

An entire dedicated room used solely for working from home, a letter from your employer confirming that they need you to work from home, the actual invoices to support the claim (e.g. electricity, water, rates, bond/rental invoice), and the breakdown of total expenses and the apportionment calculation.

What do I do if I didn't receive an IRP5?

Your employer should issue you an IRP5 after the end of the tax year. If you don't receive one, there are a few reasons why this may happen:

You work overseas for a foreign employer

If you work overseas for a foreign employer and no tax has been deducted from your salary in South Africa, you will not receive an IRP5. If you qualify for the foreign employment income exemption (i.e you pass the 183 day/60 continuous day test) then your income should not be taxed in South Africa. However, you should still declare this foreign income in your Tax Return (ITR12) so that SARS has a complete view of all your earnings. If you don't qualify for the exemption, then this foreign income should be taxed in South Africa — any tax paid in a foreign country will be offset against tax to be paid in South Africa.

You work for a foreign employer in South Africa who doesn't withhold tax

If you're based in South Africa but work for a foreign employer who isn't registered with SARS, no tax will be deducted from your salary and you won't receive an IRP5. You should actually be paying provisional tax twice a year. Navigate to TaxTim's "Foreign Employment" section and declare your earnings there, or on SARS eFiling tick "Foreign Income" in the opening wizard.

You contract for a company who does not deduct tax from your salary

If you are self-employed (i.e an independent contractor or a freelancer) then no tax will be deducted from your salary and you will not receive an IRP5. You should be paying provisional tax twice a year. Navigate to TaxTim's "Self-Employed, Independent Contractor, Freelancer" section and declare your earnings there.

Your previous employer has shut down

Check on your SARS eFiling profile to see if your IRP5 has been submitted to SARS. Simply request your Tax Return and it will hopefully already be populated with your IRP5 details. If you really can't find it anywhere online, head to the police station and swear an affidavit stating that you're not able to obtain your IRP5 and include the relevant reasons. You'll then need to submit the return manually to SARS with this affidavit, along with your payslips/proof of earnings for the year.

FAQs