Gross Earnings – Gross income refers to the total amount earned before any taxes and other deductions.
Gross Deductions – Gross Deductions refers to the total of all taxes & any other deductions that eventually lead to the net pay as reflected on your payslip as well as the amounts paid into your bank account.
Tax Deductions – On our payslip, this refers to the total tax deductions made against your taxable income. Usually these will be in the form of PAYE as well as UIF on a basic payslip.
Other Deductions – Other deductions refer to deductions made against your gross earnings, however, they are not for tax deduction purposes, examples of other deductions can be in the form of an example, a deduction made against your salary for the repayment of a salary cash advance or reimbursements for salary amounts erroneously deposited into your account by the company.
Company Contributions. These refer to any company contributions made by the company for the benefit of employees or directors without an actual cash incentive to the employee or company director. Examples include the 1% statutory contribution made by companies towards UIF monthly contribution.
Advances – These are usually short-term loans made to employees & company owners that are usually deducted later from future salaries. They are usually tax free and form part of non-taxable income & deductions
Advance Repayments – These are short-term loan repayments that are deducted later from an employee’s future salary but do not form part of taxable deductions.
Net pay – The amount that gets paid into your bank account. The net amount will be compared directly to the amounts deposited into your bank account as at the date of the payslip.
Basic pay – The fixed basic pay rate from month to month without any performance bonuses, overtime, reimbursements, commissions excetra.
Bonus pay – Compensation that is above and beyond the normal payment such as a performance bonus.
Commissions Received – Select commissions instead of basic pay, if you receive multiple payments in a month.
Overtime Pay – Refers to payment for any hours worked, that exceed normally scheduled working hours.
Reimbursement for Business Kilometres – Allowable reimbursement for business kilometers are not subject to tax and form part of non-taxable earnings.
Housing Allowance – Housing Allowance forms part of your tax deductibles income and is reported under Total Perks on our payslip design.
Travel Allowance – The fewer km traveled in a year – the more SARS allows as a deduction per km traveled under the fixed cost section. If total of 20 000 km traveled (This is total which includes private and business km) with a car that has a value of R400k, the fixed cost awarded would be R112 443 / 20 000 = R5. 622.
Motor Vehicle Allowances – Fixed travel allowance: Only an 80% portion of the fixed travel allowance is subject to the deduction of employees’ tax. If the employer is satisfied that the vehicle is used more than 80% for business purposes, only 20% of the fixed travel allowance is subject to the deduction of employees’ tax. Reimbursive travel allowance: The reimbursive allowance might be a taxable or non-taxable allowance.A non-taxable reimbursive allowance is a reimbursive amount, based on actual business kilometres travelled, which is deemed to be expended on business travelling if such reimbursive amount –does not exceed the rate per kilometre as fixed by the Minister of Finance; and no other form of compensation, for example another reimbursement (other than for parking or toll fees) or a fixed allowance, has been given/paid to the employee.A reimbursive travel allowance that is deemed to be expended on business travelling (that is, one that complies with both criteria mentioned above), is a non-taxable reimbursive travel allowance and no employees’ tax must be deducted from such reimbursement. A reimbursive travel allowance which DOES NOT comply with both criteria mentioned above, is a taxable reimbursive travel allowance and employees’ tax must be deducted from any amount paid that exceeds the prescribed rate per kilometre. The amount paid that does not exceed the prescribed rate is not subject to PAYE withholding. The amount paid that exceeds the prescribed rate is subject to PAYE withholding.
Medical Aid Contributions – If you contribute to a registered medical aid scheme in South Africa, you’re eligible for tax relief in the form of tax credits, which are deducted from your annual personal tax liability. Credits are non-refundable and fall into two categories, Medical Schemes Tax Credit (MTC), and Additional Medical Expenses Tax Credit (AMTC). The Medical Schemes Tax Credit is a deductible associated with your monthly contribution. Calculations are based on a fixed rate, and take into account the number of dependents covered by the scheme fees. If you’re the main member of a medical aid scheme, you and your spouse are entitled to a fixed tax credit of R286 per month. The 2017 rate for each child or dependent is R192 per month. You can determine the total tax credit by adding the monthly rates and multiplying them by 12, as in the following example: Main member and first dependent: R286 x 2 = R572 , Four dependents: R192 x 4 = R768, Total tax credit per month: R768 + R572 = R1 340 Total annual tax credit: R1 340 x 12 = R16 080. The Additional Medical Expenses Tax Credit. The second tax credit is a rebate on qualifying medical expenses not covered by the medical aid scheme and paid from your personal funds. Costs relating to MRI and CT scans and healthcare services provided by registered medical practitioners are deemed qualifying expenses by the South African Revenue Services (SARS). Medication prescribed by registered doctors or pharmacists qualifies; over-the-counter medicines do not. You can also claim back expenses associated with treatments or procedures conducted in registered hospitals or nursing homes, and any medical fees incurred and paid for outside the country. AMTC based on age and/or disability.Two distinct medical expenses tax credits take age and disability into account:AMTC tax credit 1,If you’re 65 years or older, or are under the age of 65 years and are disabled, or your spouse or a child dependent is disabled, you’re eligible for a tax credit totalling 33.3% of your out-of-pocket expenses. AMTC tax credit 2, All other tax payers can claim back 25% of their personally funded medical costs, if these costs equal more than 7.5% of their taxable income.Excess medical aid contributions, there’s a second component to the AMTC – excess medical aid contributions. These credits are subject to age and disability, as outlined above, and can be claimed as follows:AMTC tax credit 1: 33.3% of the scheme fees exceeding 3x the MTC,AMTC tax credit 2: 25% of contributions above 4x the MTC.How to deduct medical tax credits, It’s important to emphasise that medical tax deductibles are non-refundable and can’t be carried over to the following tax year.How you deduct the medical tax credits depends on how you pay your tax. Provisional tax payers deduct the tax credits from one of two annual IRP6 payments. PAYE tax payers claim the tax credits on assessment, or request the employer to deduct the amount from the monthly tax contribution. If you don’t contribute to a medical aid scheme, you may be missing out on vital medical benefits, and you won’t be legally entitled to specific medical tax credits.
PAYE – Which stands for “Pay As You Earn” and it is the type of income tax that you pay. You must deduct PAYE from your salary on a monthly basis and pay it to SARS. The amount of PAYE that you will contribute depends on how much you earn, and is calculated from the tax tables issued annually by the South African Revenue Service. We shall calculate and disclose the deemed PAYE amount and reflect it on your payslip in order for you to have a payslip that reflects compliance with statutory deductions.
UIF – This stands for “Unemployment Insurance Fund” and is another deduction from your salary that is paid by your employer on a monthly basis. All employees, as well as their employers, are liable for these contributions. As an employee you pay 1% of your total salary and your employer pays another 1% of your salary to the fund every month. If you become unemployed after contributing to the UIF, or your company does not pay for maternity leave, you will have the right to claim from the UIF.
SDL – This stands for the Skills Development Levy. Employers must pay an equivalent of 1% to the South African Revenue Services. SDL however cannot be deducted from employees and as such it is not reflected on an employee payslip.
TAXABLE EARNINGS – Taxable earnings refer to all amounts included in your gross earnings but are subject to tax. These will include your basic salary, commissions earned, bonuses, overtime pay, taxable portion of travel allowances & any other remunerations that form part of your taxable income.
NON – TAXABLE EARNINGS – This includes amounts earned but do not form part of your taxable income. Examples includes reimbursements for actual travel expenses incurred by an employee, Employment relocations allowances, Scholarships, Bursaries, Amounts received from tax free investments, Funds from divorce proceedings, Special Uniform Allowances, Lump sums from qualifying life policies, Certain pensions received from sources outside South Africa. Income derived from foreign sources but limited to a maximum of R1,25 Million.
TOTAL PERKS – These refer to employee benefits that are in a form of non-monetary compensation that employees receive in addition to a regular salary. These benefits typically include medical insurance, dental and vision coverage, life insurance and retirement planning, but there can be many more types of benefits and perks that employers choose to provide to their teams. Many of the benefits employers provide are only available for full-time employees. Further examples include, Medical Aid Benefits, Pension fund plans, Life insurance policies, Disability benefits, Bursaries & educational plans, Investment opportunities. Some company perks form part of taxable or non-taxable income.
Pension Fund Contributions – It is worth knowing what the tax advantages are to saving in a retirement fund, because the incentives you enjoy can make a big difference to the outcome of your attempts to provide yourself with an income in retirement.Knowing the tax disadvantages of withdrawing your savings from a retirement fund may also influence your decision about what to do with your savings in an employer-sponsored fund when you leave a job.It is also important to understand the tax you will pay on your retirement fund savings at retirement when you withdraw money or convert it into a pension. Tax is payable, but typically at a lower rate than the tax you would pay if you paid the tax now and saved the after-tax amount. Read more:There are three ways in which you get a tax advantage from saving in a retirement fund:1. Tax deductions for contributions,Taxpayers who make contributions to a retirement fund enjoy a tax deduction up to certain limits.This includes contributions made to a retirement annuity, pension fund and provident fund.If you contribute within these limits, it means you will save a certain amount in tax for every rand you contribute – anything from 18c to 45c depending on your marginal tax rate.The contributions you can deduct each year are 27.5% of your taxable income or remuneration, whichever is the highest, subject to a limit.This limit is a maximum contribution that qualifies for a tax deduction that is currently R350 000 a year. You may reach this limit if your remuneration is above R1.27 million.What’s included,Contributions to your fund made on your behalf by your employer are included in these limits. Any amounts contributed by your employer are added to your salary as a taxable fringe benefit, but can be offset by the tax deduction, as long as the amounts both you and your employer contribute are within the limits allowed for the deduction.For the purposes of calculating your tax deduction for retirement contributions your remuneration includes your salary, overtime pay, allowances, leave pay, bonus, fringe benefits and any gratuities or commission before any deductions. If you are retired, your remuneration will be your pension. Your taxable income includes all your income including rental, investment and business income, less any exempt income and deductions plus your taxable capital gains. Your taxable income will be higher than your remuneration or your pension, if you earn rental income, interest income or made any taxable capital gains.How you claim the deduction.As a salary earner contributing to an employer-sponsored retirement fund, you will enjoy this tax deduction immediately and it will reduce the pay as you earn (PAYE) tax deducted from your salary each month.As a contributor to a retirement annuity (RA), you will be able to claim the tax deduction when you file your income tax return and, if you are a provisional taxpayer, you can reduce your taxable income by the amount you have contributed.If you are a salary earner contributing to an RA, you can ask your employer to adjust your monthly PAYE to take into account of your contributions to an RA.Excess contributions carry over,If you contribute more than the tax deduction limits to a retirement fund, the excess amounts can be carried over to the following tax year and, if within the limits, used as a tax deduction in that year. Any amounts you contribute to a retirement fund that you have still not claimed as a deduction by the time you retire, can be used to reduce the tax you need to pay on any cash lump sum you take before, or at retirement.Alternatively, you can use the contributions you have not been able to deduct from your taxable income as a deduction from the taxable portion of your annuity (pension) income in retirement. 2. Tax-free growth, Amounts you contribute to your retirement fund can earn interest, dividends and make capital gains without incurring tax. Compounding over many years, this can enhance your savings enormously. This tax concession also applies to contributions you make to a retirement fund that are not allowed as a tax deduction because they exceed the allowable limits.3. Tax concessions at retirement,When you retire, you can withdraw a lump sum equal to one third of your retirement savings. There are some exceptions for provident fund members who were members before March 1 2021. Up to R500 000 of that lump sum can be taken tax free. This tax-free amount is reduced by any lump sums you have taken previously as a withdrawal on resignation from your job, or on retrenchment. If you retire after the age of 65, the tax you pay on the income you receive as a pension or annuity will be reduced, as taxpayers over the age of 65 enjoy further tax rebates.
