A guide for first-time tax-filers

You probably haven’t spent much time thinking about the day you have to pay taxes – in fact, most of us avoid doing so. But it’s a bad bet to get on the wrong side of the South African Revenue Service (Sars), so it’s worth understanding the basics early and learning your way around the system.

For the average employee, tax isn’t complicated – though it can get more involved if you have multiple income streams, freelance work or a side hustle. If you’re one of the lucky ones with PAYE (pay as you earn) deducted from your salary, your employer has already done a lot of the heavy lifting.

You generally start paying personal income tax once your taxable income exceeds R95,750 a year (if you’re under 65) – roughly R8,000 a month. 

Your taxable income is worked out annually by adding up your income and subtracting the amounts Sars allows you to deduct. These include contributions to retirement funds, qualifying donations and certain work-related expenses. Tax is then calculated on what’s left, based on your tax bracket. Depending on what was deducted during the year, Sars may owe you a refund – or you may need to pay in a shortfall

Before anything else, it’s important to note that the “tax year” doesn’t follow the calendar year. In South Africa, it runs from March 1 to the end of February. Tax filing season is different: it’s the period when Sars accepts tax returns. For most salaried employees (non-provisional taxpayers who aren’t auto-assessed), filing season typically runs from late July to October (exact dates vary each year). 

The nitty-gritty

The first order of business is to make sure you have a tax reference number and that you’re registered on Sars eFiling (or the Sars MobiApp). Many people already have a tax number because their employer registers them when they start work, but it’s worth checking early so you’re not scrambling later.

Once you’re set up, most of the admin happens online.

The key thing to understand is this: the form you submit to Sars is your tax return, called the ITR12. The other documents – like an IRP5 – are supporting certificates that feed into it.

Your employer issues an IRP5 (or sometimes an IT3(a)), which shows your total earnings, PAYE deducted, and certain deductions and benefits for the tax year. Sars usually receives this information directly from your employer too, but you should still make sure it’s correct on your return.

If you earn additional income outside your salary – for example, from freelance work or a side business – you may also be a provisional taxpayer, which means Sars expects you to submit provisional tax returns (IRP6s) and make payments during the year. Even then, you still submit an ITR12 annually. 

Once you’ve completed and submitted your ITR12, Sars will issue an ITA34, which is your notice of assessment. If you’re happy with the outcome, congratulations – you’ve filed your first tax return.

The finer details

Some taxpayers receive an auto-assessment from Sars. This is when Sars generates a return using information it already has – including third-party data from employers, medical aids and investment providers. If you’re auto-assessed, you may not need to file a return at all – but you should still check the figures, because the responsibility for errors ultimately sits with you. 

If you disagree with the auto-assessment or if something is missing, you can open it, correct it and submit an updated ITR12 on eFiling before the deadline. In certain cases, Sars allows taxpayers who don’t agree with an auto-assessment to request an extension – but you’ll need reasonable grounds. 

If you have income from investments, rental property or capital gains, Sars will ask about it in the ITR12. Investment income is usually supported by an IT3(b) certificate, while capital gains (or losses) may be shown on an IT3(c) form. If you have a tax-free savings account, this may reflect on an IT3(s). 

If you are married in community of property, investment income such as dividends, rental income and capital gains is generally split 50/50 for tax purposes, regardless of whose name the asset is in. Salary income is still taxed in each person’s own name.

Paying tax is no-one’s favourite activity, but it’s one of those unavoidable steps into adulthood. Once you understand the basics, the whole process becomes a lot less intimidating – and far easier to stay on the right side of Sars.

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