You are Here > Home > YouTube Channel > Video: Five tax myths

Video: Five tax myths

Aug 24, 2021

Many employees don’t understand the complex tax calculations made by their companies and they often question these deductions.

According to tax specialist Tanya Tosen, there are five key things an employee needs to understand when it comes to their tax.

Myth one:

Cost-to-company is taxed higher than a basic-plus remuneration structure

This is untrue. The model used makes no difference. According to Tosen, when converting a company payroll from basic-plus to cost-to-company, neither the employee nor the business should be worse off in the end.

Myth two:

My entire income is taxed according to my current marginal tax rate

This is a common misconception and completely wrong.

South Africa has a progressive tax system. This means an employee’s total remuneration is divided into several portions called “tax brackets”.

The first portion is taxed at the lowest rate of 18% and subsequent portions are taxed at progressively higher rates, up to 45%.

For example, for the 2022 year of assessment a worker earning above R467 500 per annum is taxed at 36% only on the portion exceeding that base amount.

Portions below that base are taxed according to their lower associated marginal tax rates. It is more helpful to look at your average tax rate.

Myth three:

If my increase pushes my income into a higher tax bracket, I’m losing money because of a higher tax rate.

Because of the progressive tax system, if an increase pushes an employee’s income into a higher tax bracket, only that portion exceeding the bracket’s base amount will be taxed at the higher rate.

Any amount below it continues to be taxed at the rates tied to each lower bracket.

Myth four:

My annual bonus is taxed differently from the rest of my income

Employees are taxed on their total yearly earnings, which can include a bonus or other benefits.

While their bonus increases their total annual earnings and may even push them into a higher tax bracket, companies typically factor this into their calculations in advance.

Myth five:

I’m supposed to get an age-dependent rebate

South African tax offers three age-related rebates, but most working people only qualify for the first, namely the primary rebate, which applies to everyone below the age of 65.

For the 2022 tax year (i.e. the tax year ending on 28 February 2022) the primary rebate is R15,714. Those over 65 receive an additional rebate of R8,613, and those over 75 get another R2,871 off their annual tax bill.

The government usually increases these rebate amounts each tax year (usually in line with inflation).


Submit a Comment

Your email address will not be published. Required fields are marked *

Maya Fisher-French author of Money Questions Answered

Previous Articles

Funeral policy fraud on the increase

When fraudsters access your personal information, they can use this information to take out a funeral policy in your name, and then claim benefits on the policy using a fake death certificate and other supporting documentation. “Finding out you are the victim of a...

SARS issues guidance on crypto assets

On 27 August 2021, SARS provided further guidance on the correct tax treatment of crypto assets and how this must be declared in people’s tax returns. SARS published a document on its website entitled Crypto Assets & Tax. The publication should perhaps best be...

Self-service facility for GEPF members

Technology is making it easier for GEPF members and pensioners to keep track of their pension information and claims process. By downloading the new GEPF self-service mobile app onto your device, you can remove the frustration of standing in long queues at GEPF...

Video: Being rich vs being wealthy

In his book The Psychology of Money, Morgan Housel writes about the difference between being rich and being wealthy. He defines riches as an income you earn, because that allows you to take on the debt to buy that R800 000 car or R40 000 handbag. Wealth on the other...

High-risk land investment leaves angry investors out of pocket

Many South African investors who bought UK property developments through SA-based property marketing company SJ Capital, have seen no returns for over 11 years. Investigations have found that the investment is extremely high risk and that investors were not fully...

Listen: Top tips for financially savvy kids

Maya (@mayaonmoney) chats to certified financial planner Gugu Sidaki (@gugusidaki) about ways to skill our children so that they can better manage money as adults. Gugu is author of My 3 Piggies, a series of books for kids all about money. Also listen to this podcast,...

Treasury’s solution to early withdrawal

As part of its ongoing retirement reform process, National Treasury is proposing the introduction of a two-bucket retirement system to provide for shorter and longer-term needs. John Anderson, executive at Alexander Forbes, says it may work along the same percentages...

Video: Marriage and money

When couples marry, including Customary Marriage, they will automatically be married under community of property, unless they sign a separate antenuptial contract. This is seen as a way to protect women, especially those who stay at home to raise the family. The term...

The NSSF will not meet the needs of South Africans

While noble in its aim, the establishment of a National Social Security Fund (NSSF) is largely unworkable. In August, the department of Social Development issued a Green Paper on Comprehensive Social Security and Retirement Reform, which outlined a “super fund” to...

Life insurers see a 44% jump in death claims

Death claims statistics released recently by the Association for Savings and Investment South Africa (ASISA) have shown a massive 44% jump in lives lost with an overall increase of 64% in the value of claims paid compared to the previous year. Between 1 April 2020 and...

Pin It on Pinterest

Share This