In South Africa, tax legislation and regulations are governed by the South African Revenue Service (SARS). As a South African taxpayer, it is important to understand the tax requirements to ensure that you are correctly paying the correct amount of tax each year. This article will discuss the tax requirements in South Africa in 2020 and how much you need to earn in order to pay tax.
Tax Requirements in South Africa 2020
In South Africa, income tax is levied on all income earned within the country, as well as on income earned abroad. Taxable income includes salary, income from investments, rental income, and income from other sources. All South African taxpayers must register for income tax with SARS and submit an income tax return each year.
In 2020, the basic tax rate for individuals is 18% for the first R79,000 of taxable income and then a marginal rate of up to 45% for taxable income over R1,500,000. Individuals are also required to pay a medical tax of 7.5% of their taxable income, as well as other taxes such as capital gains tax, estate duty, and transfer duty.
How Much Must You Earn to Pay Tax?
In South Africa, all individuals must pay tax if their taxable income exceeds R79,000. This means that if you earn more than R79,000 in a year, you must pay tax on the amount that exceeds R79,000. For example, if you earn R90,000 in a year, you must pay tax on R11,000 (R90,000-R79,000).
In addition, individuals must pay medical tax if their taxable income exceeds R17,000. This means that if you earn more than R17,000 in a year, you must pay medical tax on the amount that exceeds R17,000. For example, if you earn R20,000 in a year, you must pay medical tax on R3,000 (R20,000-R17,000).
It is important to be aware of the tax requirements in South Africa in 2020. All individuals must pay tax if their taxable income exceeds R79,000 and medical tax if their taxable income exceeds R17,000. This ensures that individuals are correctly paying the correct amount of tax each year.
Every person living in South Africa is legally required to pay taxes in line with the government’s budget process. In 2020, the new budget announced the amount of money an individual has to earn each year to be subjected to pay income tax.
Income tax is levied on a person’s yearly earnings from any sources, be it from employment, a business venture, or interest from investments. The South African government then uses these income tax payments to fund various government initiatives.
If your total earnings are less than the annual threshold or the exempted amount, then you are not liable to pay any tax. The annual taxable income threshold for 2020 depends on your age and your tax residency in South Africa. Generally, the minimum threshold for anyone earning in South Africa is R79,000 per year, meaning if your taxable income is below this amount then no taxable amount will be collected.
The total taxable income thresholds for 2020 are:
• Between 18 and 65 years of age (including all tax residents) – R79,000
• Above 65 years of age – R122,000
• Younger than 18 years of age – R29,400
Individuals who earn an income above this threshold are liable to pay tax based on the progressive tax system in South Africa. Each cumulative amount of money you earn beyond this value is charged at an incrementally increasing tax rate. A single person pays a tax rate of 18%, with tax rates of up to 45% applicable to those earning more than R1.5 million per year.
In addition to income tax, employees must also pay some type of employee’s tax – which includes things like pension contributions and medical aid payments. To determine what type of employee’s tax rate you are liable to pay, it will depend on the type of employment contract you hold, as well as your earning threshold.
Understanding South Africa’s progressive tax system and the income thresholds is an important part of understanding your responsibilities as a taxpayer. Having an understanding of what you need to pay, and when, will help you remain in full compliance with the South African Revenue Service.
It’s also essential to seize all opportunities to reduce your taxable amount. Every taxpayer is granted several deductions, such as retirement annuity contributions and deductible medical aid premiums, to help reduce the burden of the tax bill.
In conclusion, it is essential for all South African taxpayers to understand the income thresholds for tax payments, as well as what deductions are available to help reduce their taxable amount. Many government initiatives are funded from the taxes collected, so understanding your tax requirements is an important part of being a responsible citizen.