Introduction to Taxation (part 2)
By the end of this week, you should be able to:
Know where to go to file your tax return
Understand the various components of your pay slip
Know how taxation will affect your life going forward
Explain the differences between the treatment of medical aid and
retirement fund contributions
Perform tax calculations of normal tax liability (see the updated
taxable income framework)
Understand the basics of VAT and perform basic VAT calculations
Know the differences between Input and output VAT
Know which items are VAT exempt or zero-rated
Individuals
Retirement contributions – individuals
You will have heard about pension funds, provident funds and retirement
annuity funds. All of these are retirement tools that individuals use to plan
to have enough wealth to fund their lifestyle after they retire. While you
don’t need to know the differences now, these are different retirement
funds and have different rules
Deductions for pension, provident and retirement annuity funds are
allowed as deductions
There are limits as to what can be deducted in a single year
As it is a deduction, it is applied after income in the taxable income
framework
The amounts that eventually get paid out from these funds in your
old age are still subject to tax, but at a much lower rate and often
large portions are excluded from tax
, Retirement deduction – individuals
• Contributions to Pension, Provident & Retirement Annuity Funds
attract deductions
• This deduction is only available to individuals
• Contributions that your employer makes for your benefit above and
beyond those that you make can also be allowed as a deduction.
• This amount is limited, and all amounts not deducted are carried
forward for possible deduction in the succeeding year.
• This is a specific deduction from income for an expense incurred,
not an exemption
Medical aid rebate – individuals
This is a rebate – not an exemption or deduction – therefore, like
the primary rebate, it reduces the normal tax amount
This amount is fixed, regardless of how much you contribute to
medical aids
The amount cannot lead to a refund from SARS
If the taxpayer has dependents on their medical aid, then they get
additional credits as follows:
• Individuals who contribute to medical aid funds get rebates on their
normal tax
- This rebate is fixed, based on the number of dependents
- This rebate does not allow for a refund of tax
• These are prescribed fixed monthly amounts which reduce the
normal tax liability per tax tables.
By the end of this week, you should be able to:
Know where to go to file your tax return
Understand the various components of your pay slip
Know how taxation will affect your life going forward
Explain the differences between the treatment of medical aid and
retirement fund contributions
Perform tax calculations of normal tax liability (see the updated
taxable income framework)
Understand the basics of VAT and perform basic VAT calculations
Know the differences between Input and output VAT
Know which items are VAT exempt or zero-rated
Individuals
Retirement contributions – individuals
You will have heard about pension funds, provident funds and retirement
annuity funds. All of these are retirement tools that individuals use to plan
to have enough wealth to fund their lifestyle after they retire. While you
don’t need to know the differences now, these are different retirement
funds and have different rules
Deductions for pension, provident and retirement annuity funds are
allowed as deductions
There are limits as to what can be deducted in a single year
As it is a deduction, it is applied after income in the taxable income
framework
The amounts that eventually get paid out from these funds in your
old age are still subject to tax, but at a much lower rate and often
large portions are excluded from tax
, Retirement deduction – individuals
• Contributions to Pension, Provident & Retirement Annuity Funds
attract deductions
• This deduction is only available to individuals
• Contributions that your employer makes for your benefit above and
beyond those that you make can also be allowed as a deduction.
• This amount is limited, and all amounts not deducted are carried
forward for possible deduction in the succeeding year.
• This is a specific deduction from income for an expense incurred,
not an exemption
Medical aid rebate – individuals
This is a rebate – not an exemption or deduction – therefore, like
the primary rebate, it reduces the normal tax amount
This amount is fixed, regardless of how much you contribute to
medical aids
The amount cannot lead to a refund from SARS
If the taxpayer has dependents on their medical aid, then they get
additional credits as follows:
• Individuals who contribute to medical aid funds get rebates on their
normal tax
- This rebate is fixed, based on the number of dependents
- This rebate does not allow for a refund of tax
• These are prescribed fixed monthly amounts which reduce the
normal tax liability per tax tables.
