ORIENTATION WORKSHOP

GRADE 12
TERM ONE 2022
TOPIC : FINANCE
SECTION : TAXATION

Presented by Mr A A Dhani ( ILEMBE )

14/01/2022 – 16/01/2022
CONTENT/SKILLS AS PER ATP

 personal income tax,

 taxable & non-taxable income
 rebates and UIF
TERMINOLOGY / VOCABULARY
1. Gross earnings: Amount earned before deductions per month i.e. basic salary plus
other earnings

2. Net pay: Amount earned after deductions per month (take home) i.e. gross minus
deductions

3. Notch; Amount earned per year/ per annual (Monthly Gross earning x 12)

4. PAYE: (Pay as You Earn) / Tax that all employees are required to pay based on the
amount of money they earn. (The more you earn, the higher the percentage of tax
you pay) you earn more, you pay more. i.e it is a deduction

5. Taxable income: amount that can be taxed according to SARS tax bracket and rate
of tax.

i.e. taxable income = gross income – tax deductible deductions(pension)

6. Income: money received on a regular basis in exchange for service, product or
activity.
7. Income: money received on a regular basis in exchange for service, product or activity.

8. Tax – rebate: - Re-Fund

- money given back to the tax payer

- Tax relief to citizens who pay tax

- Discounts towards tax payable according to age.

• Primary rebate is for everyone (for persons under 65 years)

• Secondary rebate (for persons 65 years and older)

• Tertiary rebate (for persons 75 years and older)

9. Medical aid tax credits – these amount(s) also serves as the discounts towards tax payable
to persons who are registered to medical aid scheme and pays tax. NOTE :usually given as
monthly in the tax table

10. Tax threshold - this is the minimum amount a person must earn before the tax is charged
i.e. below the tax threshold a person’s tax payable will be cancelled by the rebate(s)
Deductions – amounts subtracted from the gross salary. E.g. UIF, TAX, etc
 RATES OF TAX FOR INDIVIDUALS
2020 tax year (1 March 2019 - 29 February 2020)
Taxable income (R) Rates of tax (R)

1 – 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
 Tax Thresholds

Age

Under 65 R79 000

65 an older R122 300

75 and older R136 750

Tax Rebates
Tax Rebate

2020

Primary R14 220

Secondary (65 and older) R7 794

Tertiary (75 and older) R2 601

 Medical Tax Credit Rates for the 2020 tax year

Per month (R) 2020

For the taxpayer; or for a member or dependant of a R310

medical scheme or fund where the taxpayer him- or
herself is not a member of a medical scheme or fund

For each additional dependant(s) R209

 METHODOLOGY

When unpacking the calculation of Income Tax for

individuals, we should take the learners through a step by
step method of calculating :

➢ Gross Annual Salary / Gross Monthly Salary

➢ Monthly Pension Fund /Annual Pension Fund
➢ Taxable Income
➢ Using a Tax Table to calculate the Annual Income Tax
Payable before deductions.
➢ Tax deductions : Rebates and Medical Credits
➢ Annual Tax Payable after deductions
 Calculating Taxable Income

Example

Mrs Mkhize earns a monthly gross salary of R29 000 . Calculate her taxable
income.

Annual Gross Salary = 𝑅29 000 × 12 = 𝑅348 000

7,5
Monthly Pension Fund = × 𝑅29 000 = 𝑅2175 𝑜𝑟 ( 𝑅1750)
100
Annual Pension Fund = 𝑅2175 × 12 = 𝑅26 100
Taxable Income = Annual Gross Salary – Annual Pension Fund
= 𝑅348 000 − 𝑅26100
= 𝑅321 900
Exercise

Calculate the Taxable Income for a person earning the following gross monthly
salary:
1. R18 000
2. R24 000
3. R32 000
4. R 45 000
5. R52 000
 Reading a Tax Table and Calculating Tax before Deduction

Example ( To be discussed by the educator)

Determine the tax payable before deductions for the following :

1. A 60 year old taxable income is R50 000
2. A 77 year old taxable income is R120 000
3. A 62 old earning R170 000

SOLUTIONS

1. According to the Tax Treshold, A 60 year old whose income is R50 000 do
not pay tax.
2. According to the Tax Treshold, A 77 year old whose income is R120 000 do
not pay tax
3. Tax before deduction = 18% 𝑜𝑓 𝑅170 000
18
= × 𝑅170 000
100
= R 30 600
More Examples

4. Determine the tax payable before deductions for a 50 year old earning a
gross annual income of R330 000 .

The taxable income falls in tax bracket 3 on the tax table.

Tax before deductions = R63 853 + 31% of taxable income above R305 850
𝟑𝟏
= 𝑹𝟔𝟑 𝟖𝟓𝟑 + × 𝑹𝟑𝟑𝟎 𝟎𝟎𝟎 − 𝑹𝟑𝟎𝟓 𝟖𝟓𝟎
𝟏𝟎𝟎
= R 71339,50

5. Determine the tax payable before deductions for a 48 year old earning a
gross annual income of R425 000 .

The taxable income falls in tax bracket 4 on the tax table.

Tax before deductions = R100 263 + 36% of taxable income above R423 300
𝟑𝟔
= 𝑹𝟏𝟎𝟎 𝟐𝟔𝟑 + × 𝑹𝟒𝟐𝟓 𝟎𝟎𝟎 − 𝑹𝟒𝟐𝟑 𝟑𝟎𝟎
𝟏𝟎𝟎
= R 100 875
Exercise ( Calculating Tax payable before deductions )

Determine the Tax payable before deductions for the following Gross Annual Incomes :

1. A person below age 65 and earning a gross annual income of:

1.1. R 60 000
1.2. R 125 000
1.3. R 350 000
1.4. R 218 000

2. A person below age 69 and earning a gross annual income of :

2.1. R100 000

2.2. R280 000
2.3. R600 000
 CALCULATING DEDUCTIONS
There are TWO deductions that you will be making :

❖ Rebates
❖ Medical Credits

Rebates is dependant on the individuals AGE

Medical credits is deducted when the individual contributes towards a
medical aid.

Tax Rebate 2018/2019

Primary R14 067

Secondary (Persons 65 and older) R 7 713

Tertiary (Persons 75 and older) R 2 574

Per month (R) 2020

For the taxpayer; or for a member or dependant of a medical R310
scheme or fund where the taxpayer him- or herself is not a member
of a medical scheme or fund
For each additional dependant(s) R209
Lets take a look at some examples :

Example

Calculate the tax deductions for the following :

1. A person who is 48 years old and is married and have 1 child and pays towards
a medical aid.

Rebate = R14067 ( qualifies for primary rebate only) Why?

Medical Credits = (2 x R310 x 12) + ( 1 x R209 x 12)

= R7440 + R2508
= R9948
Total Deductions = R14067 + R9948
= R 24015
Exercise

Calculate the total tax deductions for the following :

1. A 27 year lady who has 1 child and is making a medical aid contribution.

2. A 68 year old man who has 5 children and no medical aid.

3. A 77 year old man who is married and has 3 children and is paying for a
medical aid
WORKED EXAMPLE

Buhle is 55 years old and earns a gross salary of R674 000 per year. She has a
husband and 3 children on her medical aid. Calculate her Annual Tax payable.

Step 1 : Work out the Taxable Income

Monthly Gross Salary = 𝑅674 000 ÷ 12 = 𝑅56166,67

Monthly Pension Fund = 7,5% x R56166,67

= R4212,50 ( or R1750)
Annual Pension Fund = 𝑅4212,50 × 12
= R50550

Taxable Income = 𝑅674 000 − 𝑅50550

= R 623 450
Step 2 : Work out the Tax payable before deductions using the Tax Table

Tax Before Deduction = 147 891 + 39% of taxable income above 555 600
39
= 𝑅147 891 + × 𝑅623450 − 𝑅555 600
100
= R 174 352, 50

Step 3 : Work out Deductions 3 children

Deductions = Rebate + Medical Credits X 12 for year

= R14220 + (2 x R310 x 12) + ( 3 x R209 x 12)

Main member +
spouse
=R 29 184
Step 4 : Calculate the actual Annual Tax Payable

Annual Tax Payable = Tax before deduction – Rebate – Medical Credits (Deductions)
= R 174 352, 50 – R29184
= R145168.50

Exercise

1. Peter is 50 years old and earns a gross annual salary of R 432 000. He has his wife and
two children registered as dependants on his medical aid. Calculate his Annual Tax
payable.

2. Roy is 70 years old and earn a gross annual salary of R250 000. He has no medical aid or
dependents. Calculate his Monthly tax payable.
Taxation involving DONATIONS ( non-taxable)

Zweli who is 54 year old is an employee at a Chemical Company. He earned

an annual income of R367 000, including bonus which is equivalent to the
monthly income for the 2018/2019 tax year.

• He contributes 7,5% of his basic salary to the pension fund.

• He is also donating R 35 900 per annum to the registered charity organisation,
the donation is tax deductible.
• He contributes R4 550 to the medical aid monthly, for himself and his 2 children.

1. Calculate the Taxable Income

2. Determine his annual medical credits

3. Hence, calculate his annual income tax.

How do we calculate Tax when a donation is given by the individual ?

Inorder to work out Taxable income we must use the following formula :

1. Taxable Income = Annual Gross Salary – All non-taxable items(Pension Fund and
Donations)

Monthly Gross = 𝑅367000 ÷ 13 = 𝑅28230.77

7.5
Monthly Pension Fund = × 𝑅28230.77 = 𝑅2117.31 𝑅 1750 ?
100
Annual Pension fund = 12 × 2117.31
= R25407.72

Taxable income = R367 000 – ( pension fund + donation)

= R367 000 – (R25407.72 + R35 900)
= R305692.28
2. Medical Credits = (R310 x 2 x 12) + ( R209 x 12)
= R 9948

𝟐𝟔
3. Annual Income Tax = 35 253 + 𝒙 (𝟑𝟎𝟓𝟔𝟗𝟐. 𝟐𝟖 − 195 850) – Rebate – Medical
𝟏𝟎𝟎
credits
- R14067 – 9948
= R 39796.99
Exam type Questions
A teacher who is close to retirement (aged 65 years old), earns a taxable
income* of R165 525 a year. Using the table below, calculate how much tax this
particular teacher will pay every month.
THANK YOU