Your personal income tax and why you need to pay it
Having a company car as part of your employment package was considered an excellent perk, and indeed it was. In recent years, however, the income tax rules have changed and what are sometimes referred to as “benefits in kind” are one of the things that the taxman has clamped down on.
If you do get a company car as part of your remuneration package, you will almost certainly be one of the South Africans who have to complete an annual income tax return. It means that your wage will be over the tax threshold of R350,000. Don’t forget that for tax purposes, your declared salary must also take the value of any benefits in kind (such as company cars or travel allowances and business expenses) into account.
The other thing to remember is that the value of the company car you declare must also include VAT.
Who does and doesn’t have to pay personal income tax
Anyone who earns less than R350,000 does not need to make an annual tax declaration. If, however, you do have to complete a return, you have until the 31st of October to do so. For more information about who does and doesn’t have to make a declaration, you’ll find the “Things you need to know about the 2018 Tax Season” document on Wonga’s website very useful.
Although having to pay income tax is a nuisance to those who qualify, it is one of life’s necessities here in South Africa, as it is in the majority of countries around the world. For anyone who tries to avoid or evade paying income tax illegally, the fines can be quite severe.
Avoidance and evasion – what is the difference?
Tax avoidance and evasion may sound like the same thing, but they are not. Tax avoidance, for example, means finding legal ways of exploiting the South African tax regime in order to gain an individual advantage. This involves making an annual tax declaration for the full amount, but then using tax deductions or making alterations to a business structure or even creating an offshore business in a tax-free zone.
Evasion, on the other hand, is when an individual seeks to evade paying an amount of tax using illegal methods. This usually involves lying to the taxman by withholding specific information or returning lower figures than you have earned.
There is a saying that there are only two certainties in life – death and taxes. We all die, and we all have to pay income tax. But while income tax is viewed by most people as a pain, it is nonetheless a pain that offers a gain. That gain comes by way of the services you receive in return for paying tax.
What does your personal income tax go towards?
Last year, the amount of personal income tax collected contributed 38.1% of total South African tax revenue. You can check out this infographic for information about where the balance of revenue came from and how much and what it was spent on.
So, when all is said and done, paying your personal income tax correctly and on time will not only keep you on the right side of the law; you will also be contributing your share towards important things like education, health and social protection services.