Salary earners in South Africa are statutorily required to pay tax under the Pay As Your Earn (PAYE) tax scheme. Taxes under this tax system fall under the control of the South African Revenue Service. In this article, the focus will be placed on what the PAYE tax is all about, how it works, how to calculate PAYE tax and other related sub-topics.
What is PAYE tax South Africa?
Pay As You Earn tax, otherwise known as the PAYE tax, is a personal income tax paid by working-class South Africans on a monthly basis to the South African Revenue Service. This tax is mandatorily paid by employers on behalf of employees directly to the South African Revenue Service using the agency’s publicly available tax rates tables. Payments are deducted at source from salary, wages and bonuses.
How does PAYE work?
Pay As You Earn tax system is a key component of South Africa’s tax administration system. The tax is also known as the Employees’ Tax. This tax is deducted at source from an employee’s remuneration by the employer for subsequent transmittal to the South African tax administration tsar, the South African Revenue Service.
Deducted amounts are paid into the coffers of the South African government through its tax agency on a monthly basis. This process involves the completion of certain documentation and administrative processes on the part of the employing organisation or authorised representatives.
Employers of labour and employees are required to register with the South African Revenue Service at its eFiling portal. The process of registration includes a series of interrelated actions and procedures spelt out below:
- First of all, users who are yet to register on the eFiling portal necessarily do so by creating an account. The account registration process includes the submission of personal details (name and date of birth) along with an identification number.
- Upon successful login, users navigate to the ‘SARS Registered Details’ tab. Individual users proceed to the SARS Registered Details functionality by going to the Individual portfolio accessible via the Home button. On the other hand, corporate users and employing organisations select the Organisations menu tab en route to the SARS Registered Details functionality.
- Thereafter, one proceeds to select ‘SARS Registered Details’ and then ‘Maintain SARS Registered Details’. This leads to a subsequent display of the ‘Maintain SARS Registered Details’ screen, where the user is mandated to indicate authorisation to act on behalf of the concerned individual or organisation.
- Subsequently, the next step leads to the selection of the ‘Payrolls taxes menu item’ from the ‘revenue’ tab under ‘My tax products’. Thereafter, one selects ‘Add new product registration’ to register a new or additional PAYE. Successful completion of outlined steps results in the display of a RAV01 form with the ‘Payroll Taxes Registration’ options.
How to calculate PAYE on salary
PAYE calculations on salary are quite easy and can be done from the comfort of a couch or sofa. As outlined by simplepay.co.za, the following steps are involved in PAYE calculations:
- Year-to-date taxable income calculations
- Annual equivalent calculations
- Tax on annual equivalent calculations using SARS tax tables
- Projected annual tax liability calculations
- Year-to-date tax liability calculations
The PAYE is what remains after the year-to-date taxable income has been subtracted from the year-to-date tax liability
Alternatively, the following free online resources can be utilised for PAYE calculations:
TaxTim’s SARS Income Tax Calculator Tool: https://taxtim.com/za/calculators/income-tax
Old Mutual’s Income Tax Calculator Tool: https://www.oldmutual.co.za/personal/tools-and-calculators/income-tax-calculator/
South African PAYE Calculator Tool: https://www.payecalculator.co.za
SAGE South Africa Salary and Income Tax Calculator: https://www.sage.com/en-za/support/salary-tax-calculator/
How to calculate PAYE on salary (PAYE How to calculate)
For the purpose of calculation, this article will reproduce a hypothetical illustration from simplepay.co.za below. This example is drawn from the case of an employee aged below 65 years who earned 10,000 South African Rand and 12,000 South African Rand in March 2022 and April 2022, respectively.
- Step 1: Calculating the Year-to-date income
Year-to-date income = March Income + April Income
10000 + 12000 = 22000
- Step 2: Calculating the annual equivalent
10000 x 12/1 =120000 22000 x 12/2 = 132000
- Step 3: Calculating tax on the annual equivalent
120000 x 18% = 21600 132000 x 18% = 23760
- Step 4: Calculating projected annual tax liability
21600 – 16425 (primary rebate) = 5175 23760 – 16425 (primary rebate) = 7335
- Step 5: Deannualising tax liability
5175 / 12 x 1 = 431.25 7335 / 12 x 2 = 1222.50
- Step 6: Calculating PAYE due
431.25 – 0 = 431.25 1222.50 – 431.25 = 791.25
It is worth noting that accurate PAYE tax calculations must necessarily be made with close reference to SARS’ tax tables.
Who pays PAYE tax?
PAYE Tax payment is the responsibility of every South African of working age who is employed. For the purpose of administration and calculators, the South African Revenue Service divides eligible PAYE taxpayers into the following age groups: under 65, 65-74 and over 75. As per the payment policy, PAYE tax is deducted at source from an employee’s remuneration by the employer for subsequent transmittal to the South African Revenue Service.
Deducted amounts are paid into the coffers of the South African government through its tax agency on a monthly basis.
How does PAYE calculate tax?
According to an explainer by TaxTim, Pay As You Earn tax calculations are made off the following benefits accruable to an employee: basic salaries, bonuses, fringe benefits and other allowances. Explaining the PAYE tax system further, TaxTim has illuminated on the tax system’s calculation regime and procedures by way of writing the following comment:
“PAYE is calculated monthly and paid to SARS by your employer monthly, even if you are paid weekly/fortnightly. When your employer calculates your PAYE, your earnings get multiplied by 52 weeks, 26 weeks or 12 months (depending on how often you get paid) to get an annual amount before being applied to the SARS tax tables to calculate annual tax.
This is then divided again by the same work period to get the monthly PAYE tax which is then withheld, displayed on your IRP5 and paid over to SARS”
SARS tax tables are organised into four types: weekly tax, fortnightly tax, monthly tax, and annual tax. Current tables for all four tax types are illustrated below. These rates are applicable from 1st March 2022.
SARS ANNUAL TAX DEDUCTION TABLES (AN EXCERPT)
| Remuneration (in South African Rand) | Persons aged 64 and under |
| 91,313 – 91,813 | 56 |
| 91,814 – 92,314 | 146 |
| 92,315 – 92,815 | 237 |
| 94,319 – 94,819 | 597 |
The annual tax table rates indicate(s) that South Africans of working age not older than 64 are eligible for tax deductions for salary earnings above 91,312 South African Rand. The benchmark for South African citizens aged between 65 to 74 and 75 and beyond is set at 141,413 South African Rand and 157,946 South African Rand, respectively.
SARS MONTHLY TAX DEDUCTION TABLES (AN EXCERPT)
| Remuneration (in South African Rand) | Persons aged 64 and under |
| 7,683 – 7,733 | 19 |
| 7,785 – 7,835 | 37 |
| 8,703 – 8,753 | 202 |
| 10.029 – 10,079 | 441 |
SARS’ monthly tax deduction tables indicate that pay-as-you-earn rates are set in for South Africans of 64 years and under bracket from the point of 7,683 South African Rand. In the case of the other two categories, tax liability begins at 11,763 South African Rand and 13,140 South African Rand, respectively.
SARS FORTNIGHTLY TAX DEDUCTION TABLES (AN EXCERPT)
| Remuneration (in South African Rand) | Persons aged 64 and under |
| 3,523 – 3,573 | 7 |
| 3,880 – 3,930 | 71 |
| 4,441 – 4,491 | 175 |
| 4,900 – 4,950 | 255 |
| 5,614 – 5,664 | 383 |
SARS’ fortnightly tax deduction tables indicate that pay-as-you-earn rates set in for South Africans of 64 years and under bracket from the point of 3,523 South African Rand. In the case of the other two categories, tax liability begins at 5,461 South African Rand and 6,073 South African Rand, respectively.
SARS WEEKLY TAX DEDUCTION TABLES
| Remuneration (in South African Rand) | Persons aged 64 and under |
| 1,758 – 1,773 | 2 |
| 1,854 – 1,869 | 19 |
| 1,918 – 1,933 | 31 |
| 2,302 – 2,317 | 100 |
SARS’ weekly tax deduction tables indicate that pay-as-you-earn rates set in for South Africans of 64 years and under bracket from the point of 1,758 South African Rand. In the case of the other two categories, tax liability begins at 2,718 South African Rand and 3,049 South African Rand, respectively.
Who must pay PAYE in South Africa?
Pay As You Earn tax, PAYE, is compulsory for every working-class or employed South African. However, rates differ across age categories. For the purpose of PAYE payments, taxpayers are classified by the South African Revenue Service into the following age categories: under 65, 65-74 and over 75.