Employees Tax

Question 1

What is the definition of remuneration?

Answer 1

All payments and amount payable, in cash or otherwise, whether or not for service rendered. It includes:

• salary, wages, leave pay, bonuses, gratuities, commissions, fees, overtime pay, emoluments, other amounts paid for service rendered
• allowances and advances (excludes travel and subsistence allowance)
• 80% of any travel allowance (excludes reimbursive allowance based on actual km and not exceed 305c per km)
• 80% of the right of use motor vehicle provided that employer is satisfied at least 80% is used for business purposes.
• pension, superannuation allowance, annuities
• restraint of trade receipts
• retirement lump sum
• fringe benefits, etc

Question 2

What is employee’s tax?

Answer 2

A withholding tax which is deducted from an employer’s remuneration on a regular (usually monthly) basis. The deduction is made by the employer and is determined by using table issue by SARS. Every employer who pays remuneration which is subject to employees’ tax has to register with SARS as an employer for employee’s tax purposes. The employees tax must be paid to SARS within 7 days after the end of the month.
(PAYE & SITE)

Question 3

What is SITE?

Answer 3

Standard income tax on employee, payable on the first R60 000 of net remuneration.

Question 4

What is not included in the remuneration definition?

Answer 4

1. Fees paid to a person for service he rendered in the course of any trade arrived on independently by him.
2. Disability pension
3. Amounts reimbursed by employer
4. Gov grants
5. Annuities under an order of divorce or similar separation

Question 5

How does an employer determines employee’s tax?

Answer 5

Employer calculates employees’s tax on the balance of remuneration remaining after deducting the following:

• contribution by employee to any pension fund or retirement annuity fund
• option of the employer, any contributions to a retirement annuity fund by the employee in respect of which proof of payment has been furnished
• where employee is under 65 any payment of the employee’s contribution to a medical scheme
• donation made by employer on behalf of employee, limit to 5% of employee’s remuneration

Question 6

List the steps in calculation employees tax.

Answer 6

1. Calculate the monthly balance of remuneration
   Remuneration less allowable deductions:
   
   • any amount in respect of which allowable expenditure or wear and tear allowance
   • any remuneration derived by person which is deemed to be the income of such person’s spouse
   • any travel allowance included in remuneration
   • any retirement fund lump sum benefit
   • any retirement fund lump sum withdrawal benefit
2. Calculate the annual equivalent of balance of remuneration (net remuneration multiplied by the ratio which a full year bears of the period in respect of which such remuneration is payable)
3. Calculate the annual tax therein (normal tax on the employees net remuneration less normal rebates)
4. Apportion annual tax calculated for part of the year

Question 7

Calculation of employees tax where employee receives annual payment

Answer 7

Step 1) calculate tax in annual equivalent of balance of remuneration
Step 2) calculate tax on annual equivalent by adding annual remuneration amounts to the balance of remuneration
Step 3) calculate employees tax on bonus by deducting step 1 from step 2

Question 8

Calculation of employees tax PAYE

Answer 8

1. Calculate the total employees tax payable on remuneration
2. Calculate the total SITE payable
3. Calculate the PAYE deducting the SITE from employees tax

Question 9

What is the annual equivalent?

Answer 9

Net remuneration multiplied by the ratio which a full year bears for the period in respect of which remuneration is payable.