Personal Tax Calculation Examples {FPRG-25_Tax}

General information

The total taxable income is annualised (a projected total taxable income for the year is calculated), except at the end of the tax year.

The projection will use a factor of the total number of days for the year over the number of days in service to-date to project regular taxable earnings. All non-regular taxable earnings to date will be added to projected value. (An Earning may be indicated as regular in "Earning/Deduction Types" {FPRG-6}.

Number of days in service during the tax year are calculated by:
- For each full month in service, the system will use an average, calculated by dividing the number of days in the year (365 or 366 for a leap year) by 12.

If a person is appointed after the first day of a month in the tax year, the system will use the actual number of days worked in the month.

If a person resigns during the tax year, the system will use the actual number of days in service during the tax year, even if the person resigns at the end of a month.

The tax on the annualised earnings is then calculated using the standard tax tables.
To calculate the cumulative tax for the applicable employment period, the system will divide the annual tax calculated in item 2 (above) by 365 (366 in a leap year); it then multiplies the result by the number of days employed, as determined in item 1 (above).
The tax for the current month (tax period) is then determined by deducting tax paid to date: excluding any "Additional Voluntary Tax Deductions" (Calculation Method T), and Deductions marked as "Tax Directives" in {FPRI-4}.
Examples:

The tax tables to be used in the examples are the South African tax tables for 2004, as indicated below.
For the purpose of the examples, no Annual Bonus is applicable.

Taxable Income Range	Tax
0 - 70 000	0 + 18%
70 001 - 110 000	12 600 + 25% of amount over 70 000
110 001 - 140 000	22 600 + 30% of amount over 110 000
140 001 - 180 000	31 600 + 35% of amount over 140 000
180 001 - 255 000	45 600 + 38% of amount over 180 000
255 001 - 99 999 999	74 100 + 40% of amount over 255 000

Rebates

Primary Rebate = 5 400

Additional Rebate = 3 100

Tax Threshold

Persons younger than 65 years = 30 000

Persons 65 years and older = 47 222

Example 1: Person in service for a portion of the month only

Employment period	15 March 2003 – 20 March 2003
Regular Earnings for the period	1 900.00
Date of Birth	16 March 1968

NOTE: 2004 was a leap year, therefore the tax year 2004 had 366 days.

Calculation:

1. Number of Days Employed (Not full month)	15 March 2003 – 20 March 2003	6 Days
2. Number of full months in service	0	0 Days
3. Number of Days Employed in Tax Year	6 + 0	6 Days
4. Annualised Regular Earnings	1 900.00 x 366 / 6 (366 days because of leap year)	115 900
5. PAYE on Annualised Regular Earnings	22 600 + (30% of 115 900 - 110 000) – primary rebate
	= 22600 + (115900 - 110000) * 30/100 - 5400	18 970
6. Tax for the period	18 970 x 6 /366	310.98

Example 2: Person with short appointment month, in-service for a full tax year.

Employment period	15 March 2003 – 28 February 2004
Annual Notch	120 0000
Date of Birth	16 March 1968

Calculation:

	March 2003	April 2003
1. Number of Days Employed (Not full month)	15 March - 31 March = 17	15 March - 17 March = 17

2. Number of full months in service	0	1
Number of Days for full months	0 x 366/12 = 0	1 x 366/12 = 30.5

3. Number of Days Employed in Tax Year	17 + 0 = 17	17 + 30.5 = 47.5
Year to Date Taxable Earnings	5 589.04	15 589.04

4. Annualised Regular Earnings	5 589.04 x 366/17	15 589.04 x 366/47.5
	= 120 328.74	= 120 117.66

5. PAYE on Annualised Regular Earnings	22 600 + 30% of (120 329 - 110 000) - rebate = 22 600 + (120 329 - 110 000) * 30/100 - 5 400 = 22 600 + (120 329 - 110 000) * 30/100 - 5 400 = 20 298.62	22 600 + 30% of (120 118 - 110 000) - rebate = 22 600 + (120 118 - 110 000) * 30/100 - 5 400 = 20 235.30

6. Total Tax to the End of the Period	20 298.62 x 17/366 = 942.84	20 235.30 * 47.5/366 = 2 626.17

7. Tax Deduction for the Cycle	942.84	2 626.17 - 942.84 = 1 683.33

Example 3: Person in service for Full Year: RSA Tax tables 2004 used in example.

Employment period	1 March 2003 – 28 February 2004
Annual Notch	120 0000
Date of Birth	16 March 1968

Calculation:

	March 2003	February 2004
1. Number of Days Employed (Not full month)	0	0

2. Number of full months in service	1
Number of Days for full months	1 x 366/12 = 30.5

3. Number of Days Employed in Tax Year	0 + 30.5 = 30.5
Year to Date Taxable Earnings	10 000

4. Annualised Regular Earnings	10 000 x 366/30.5	Amount not calculated - the total taxable earnings for the year are used.
	= 120 000	= 120 000

5. PAYE on Annualised Regular Earnings	22 600 + 30% of (120 000 - 110 000) - rebate = 22 600 + (120 000 - 110 000) x 30/100 - 5 400 = 20 200	22 600 + 30% of (120 000 - 110 000) - rebate = 22 600 + (120 000 - 110 000) x 30/100 - 5 400 = 20 200

6. Total Tax to the End of the Period	20 200 x 30.5/366 = 1 683.33	20 200

7. Tax Deduction for the Cycle	1 683.33	20 200 - Tax Paid to Date (18 600) = 1 600

Example 4: Person in service for part of the year: RSA Tax tables 2004 used in example.

Employment period	1 May 2003 – 30 Nov 2003
Annual Notch	120 0000
Date of Birth	16 March 1968

Calculation:

	May 2003	November 2003
1. Number of Days Employed (Not full month)	0	Where a person resigns, the full number of days that the person was in service during the tax year is used.

2. Number of full months in service	1
Number of Days for full months	1 x 366/12 = 30.5

3. Number of Days Employed in Tax Year	0 + 30.5 = 30.5	214 (From 1 May to 30 November)
Year to Date Taxable Earnings	10 000	70 000

4. Annualised Regular Earnings	10 000 x 366/30.5	70 000 x 366/214
	= 120 000	= 119 719.6

5. PAYE on Annualised Regular Earnings	22 600 + 30% of (120 000 - 110 000) - rebate = 22 600 + (120 000 - 110 000) x 30/100 - 5 400 = 20 200	22 600 + 30% of (119 719.6 - 110 000) - rebate = 22 600 + (120 000 - 110 000) x 30/100 - 5 400 = 20 115.88

6. Total Tax to the End of the Period	20 200 x 30.5/366 = 1 683.33	20 115.88 x 214/366 = 11 761.74

7. Tax Deduction for the Cycle	1 683.33	111 761.74 - Tax Paid to Date (10 099.98) = 1 661.76

History of Changes

Date	System Version	By Whom	Job	Description
18 Dec 2006	v01.0.0.0	Frans	t109865	Date Effective Dependents.
03-Sep-2008	v01.0.0.0	Magda van der Westhuizen	t152258	Update manual: Language Editing - Juliet Gillies.