The South African Revenue Service (SARS) has published its annual guide for the income tax season, detailing who is expected to pay income tax in South Africa and the different types of income which will be taxed.
Taxpayers will be able to file their tax returns from 1 July 2022. Individuals who receive taxable income in excess of a specific amount, known as the ‘tax threshold’ amount, in a year of assessment are liable for income tax.
The tax threshold for the 2023 year of assessment is:
- R91,250 if you are younger than 65 years.
- If you are 65 years of age to below 75 years, the tax threshold (i.e. the amount above which income tax becomes payable) is R141,250.
- For taxpayers aged 75 years and older, this threshold is R157,900.
If you earn below these thresholds, you are not liable to pay tax.
To determine whether or not your income falls under or above these thresholds, SARS provided a breakdown of some of the different kinds of income that an individual can be taxed on, including:
- Income from employment such as salaries, wages, bonuses, overtime, taxable benefits (fringe benefits) and allowances;
- Severance benefits and certain lump-sum benefits;
- Income from a business or trade;
- Income or profits arising from an individual being a beneficiary of a trust;
- Fees from companies or close corporations for services rendered;
- Investment income such as interest, foreign dividends and dividends from a Real Estate Investment Trust (REIT);
- Rental income;
- Income from royalties;
- Annuities;
- Pensions; and
- Certain capital gains.
Penalties
From a taxpayer perspective, the importance of submitting tax returns, specifically within stipulated deadlines, is supported by the sanctions SARS can impose to the extent that these obligations are not complied with, says Tsanga Mukumba, an associate at Cliffe Dekker Hofmeyr.
Where taxpayers fail to submit returns by the relevant deadline, the South African Revenue Service (SARS) is under certain circ*mstances, empowered to issue an assessment of the amount of tax due and impose certain penalties, he said.
“For example, if a taxpayer fails to submit a return, section 95 of the Tax Administration Act empowers SARS to issue an assessment based on an estimate, using information readily available to SARS. Such an estimated assessment can only be challenged once the taxpayer has duly submitted the outstanding return,” he said.
“In addition to being able to issue an assessment which will result in the taxpayer being liable for amounts of tax, SARS may levy administrative non-compliance penalties under section 210 of the Tax Administration Act and understatement penalties under section 222 of the Tax Administration Act.”
Mukumba noted that SARS may impose an administrative non-compliance penalty when a taxpayer has failed to comply with their obligation to submit a return. These penalties are imposed for every month during which the non-compliance persists.
He added that the amount of the penalty is based on the taxpayer’s assessed loss or taxable income for the preceding tax year.
“Where a taxpayer has an assessed loss, each monthly administrative non-compliance penalty may be R250, while where a taxpayer has taxable income of R50,000,001 or more, the penalty may be R16,000 per month.
“SARS is similarly empowered to impose an understatement penalty, where the non-submission of a return has prejudiced SARS or the fiscus and resulted in a shortfall.”
Read: SARS is changing auto-assessments for taxpayers – what you should know
