Taxpayers with more than one source of employment income

Taxpayers who receive employment income from more than one source (including pensions) often mistakenly believe that the employees’ tax (PAYE) deducted by their respective employers or pension funds is enough to cover their final tax liability on assessment. The South African tax system is based on the principle of adding together all sources of income of a taxpayer into a single sum and applying the relevant marginal tax rates (based on a sliding scale from 18%-40%) to calculate the correct tax liability of the taxpayer on assessment. Basically as more income is earned => the higher the marginal tax rate => the more tax is paid on assessment.

The deduction of employees’ tax (PAYE) by the employer/pension fund is to assist the taxpayer to prepay his/her tax liability due to SARS. In the case where only one employer/pension fund is involved, the total PAYE deducted on a monthly basis should equal the tax liability on assessment (usually resulting in no extra tax due on assessment).

However, in the case where more than one employer/pension fund is involved, each of them withholds PAYE based on only the salary/pension they respectively pay to the taxpayer – this may then result in a short-fall of tax when compared to the total liability due to SARS for the year and therefore an additional amount of tax becomes payable on assessment.

SARS is advising taxpayers to avoid this situation by making additional voluntary tax payments – this can be done by requesting one or more employers/pension funds to deduct additional monthly PAYE or if the taxpayer is registered as a provisional taxpayer, a higher amount of provisional tax could be paid every 6 months.

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