Picture: 123RF/RAZIHUSIN
Picture: 123RF/RAZIHUSIN

The 2020 budget speech brought some surprises, including a reduction in tax for individuals for the 2021 tax year (starting March 1 2020). 

This was achieved through an increase in the primary rebate (this is an amount of R14,958 which reduces the tax payable by individuals each tax year – it was R14,220 in the previous tax year). 

In addition, the individual tax tables were given above inflation increases which reduces the amount of tax that individuals pay.

If you are wondering how to calculate what tax you will pay from March 1, the examples below will give you an indication. 

Example 1 – R20,000 monthly salary (R240,000 per year)

  • Look at the second row of the individual tax table
  • R240,000 – R205,900 = R34,100
  • R34,100 x 26% = R8,866
  • R8,866 + R37,062

= R45,928 – R14,958 (the primary rebate)

  • Total tax payable = R30,970
  • New monthly tax payable: R2,580
  • Previous monthly tax payable: R2,709
  • Reduction in monthly tax: R129
  • Reduction in yearly tax: R1,548

Example 2 – R40,000 monthly salary (R480,000 per year)

  • Look at the fourth row of the individual tax table
  • R480,000 – R445,100 = R34,900
  • R34,900 x 36% = R12,564
  • R12,564 + R105,429

= R117,993 – R14,958 (the primary rebate)

  • Total tax payable = R103,035
  • New monthly tax payable: R8,586
  • Previous monthly tax payable: R8,871
  • Reduction in monthly tax: R285
  • Reduction in yearly tax: R3,420

Example 3 – R60,000 monthly salary (R720,000 per year)

  • Look at the fifth row of the individual tax table
  • R720,000 – R584,200 = R135,800
  • R135,800 x 39% = R52,962
  • R52,962 + R155,505

= R208,467 – R14,958 (the primary rebate)

  • Total tax payable = R193,509
  • New monthly tax payable: R16,125
  • Previous monthly tax payable: R16,501
  • Reduction in monthly tax: R376
  • Reduction in yearly tax: R4,512

Example 4 – R80,000 monthly salary (R960,000 per year)

  • Sixth row of the individual tax table
  • R960,000 – R744,800 = R215,200
  • R215,200 x 41% = R88,232
  • R88,232 + R218,139

= R306,371 – R14,958 (the primary rebate)

  • Total tax payable = R291,413
  • New monthly tax payable: R24,284
  • Previous monthly tax payable: R24,701
  • Reduction in monthly tax: R417
  • Reduction in yearly tax: R5,004

Example 5 – R100,000 monthly salary (R1,200,000 per year)

  • Look at the sixth row of the individual tax table
  • R1,200,000 – R744,800 = R455,200
  • R455,200 x 41% = R186,632
  • R186,632 + R218,139

= R404,771 – R14,958 (the primary rebate)

  • Total tax payable = R389,813
  • New monthly tax payable: R32,484
  • Previous monthly tax payable: R32,901
  • Reduction in monthly tax: R417
  • Reduction in yearly tax: R5,004

In addition to the reduction in personal tax rates, the medical credits have increased slightly. The medical credit is a monthly reduction in tax that you are allowed if you contribute to a medical scheme. 

If you contribute to a medical scheme and it is processed by your employer, your PAYE tax is reduced monthly. 

If you contribute from your own bank account, this credit will reduce your tax liability when you submit your annual tax return and may result in a refund from the SA Revenue Service. 

This monthly medical credit has increased from R310 to R319 for the first two people covered by the medical scheme and from R209 to R215 for each additional dependant. In other words, if you have yourself and three dependants on your medical scheme, your monthly medical tax credit will increase to R1,068 from R1,038 or R30 per month. 

You can thus expect to see a reduction in tax on your salary at the end of March as these changes take effect on1 March 2020. 

 

  • Baines, a tax consultant at Mazars, is the author of ‘How to Get a Sars Refund’