Pay as you earn (PAYE) explained | Meerkat

The who, when, what, where, how of PAYE

Let’s face it – no one likes the idea of taxes. As Benjamin Franklin once said – “There are only two certain things in life: death and taxes.”

But there are a few ways to make tax less intimidating. Understanding how it works is the first step!

So… what is tax?

Tax is money that people of a democratic country pay to their government. In South Africa, money is needed for social services like transport, education, international security, national security, healthcare and welfare. Remember, your income tax contribution helps build a better South Africa! And the more people pay their fair share, the less each individual has to contribute. 

 WHO HAS TO PAY PAYE, AND DO I REALLY HAVE TO?

If you don’t earn money ( if you’re unemployed) –  then no, you don’t have to pay tax. But if you do earn money and your annual income is more than the income tax threshold, then you do have to pay tax.

That threshold is currently at R120 000 per year.  Only once your annual earning is more than R120 000 per year, do you pay tax. This threshold is determined each year by the Minister of Finance in his Budget Speech to Parliament.

It’s also important to note – If you earn more than R120 000 per year, have more than one income or have your own business, you are required to submit two Provisional Tax Returns as well as an Annual Tax Return – at which point you will be assessed to ensure that there is no shortfall. You can also be entitled to a refund.

And the more you earn, the more you pay!

The South African tax system has been designed so that people only pay taxes in proportion to their income.

 WHO DO I PAY PAYE TO?

You pay your income tax to the South African Revenue Service (SARS), which is responsible for collecting taxpayers’ money on behalf of the government.

WHEN IS PAYE PAID?

The amounts deducted or withheld must be paid by the employer to SARS on a monthly basis.

WHAT IS TAXABLE INCOME?

 Your taxable income is:

  • Income from employment (salaries, wages, bonuses, commissions, overtime, benefits
  • Certain lump sums;
  • Income from letting (renting) of property or assets;
  • Income from a business or trade;
  • Investment income like interest or foreign dividends;
  • Annuities;
  • Pensions;
  • Capital gains, etc.

 AND WHAT HAPPENS IF I DON’T PAY?

It is criminal offence not to pay income tax and if you’re caught you may be heavily fined or sent to prison. Always make a full and honest disclosure of your annual income (in other words, declare all your earnings), -and always fill in your tax returns form correctly.

WHERE DO I REGISTER?

You must register for PAYE with The South African Revenue Service (SARS) which is the nation’s tax collecting authority.

HOW MUCH DO I PAY?

SARS works out the tax on your total income over a tax year. A tax year or year of assessment runs from 1 March to the end of February the following year.

AND HOW DO I PAY?

The following payment methods are available:

  • eFiling
  • Electronic payments (EFT)
  • Payments at a bank: All payments can be made at any ABSA, Albaraka Bank Limited, Bank of Athens, Capitec, FNB, Habib Bank Zurich (HBZ), HSBC, Nedbank, Mercantile or Standard Bank branch.
  • Manual forms of payments will not be accepted by SARS. Cheques posted / delivered to SARS will be returned to the client.

Join the discussion 2 Comments

  • kudakwashe says:

    good afternoon i want to ask how come employyes working at same company same hrs and say overtym same pay.how come their paye differs for example i paid 5700 and my paye was 987 my fellow coreworker get 5700 and his paye was 500.i asked my boss he could explain to me properly.

    and also how many percentage i must pay per fourtnight for tax .hope to hear from you

    • Nicola Bompani says:

      “Your tax is paid over the year. So, it can vary in a month relative to your colleague if they have earned different amounts in previous months.

      If you are paid for a fortnight, the tax rate will still depend on how much money you have earned in the year.

      Your HR department or your boss are better placed to answer specific questions about your tax.”

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