Retirement income | Introducing effective income tax rates

by | Mar 1, 2022 | Tax

Tags: Income tax
Reading Time: 3 minutes
Income tax
According to The Income Tax Act No. 58 of 1962, individuals who earn above the outlined threshold must register for personal income tax. As a registered taxpayer, you are required to submit annual income tax returns to ensure compliance with all relevant legislation. These submissions can be made through your nearest SARS branch or online via the eFiling system.
Introducing effective rates of income tax

The South African Revenue Services (SARS) has outlined their intention to change how tax rates are calculated for individuals who receive income from multiple sources, where one (or more) of those income sources are a retirement fund. These changes were implemented to their system on 1st of March 2022, and strive to prevent taxpayers from accumulating large tax debts when submitting their income tax returns.

SARS is dealing with rising taxpayer debt
Previously, the effective tax rate for taxpayers with multiple sources of income, one including retirement funds, was based on the data available to SARS. This rate is passed to the retirement fund administrators to withhold adequate PAYE. The PAYE system allows for higher tax rates to allow their tax due at year-end to be significantly covered. Despite this solution, many taxpayers choose not to make use of it, resulting in significant tax debt, which has now brought about these income tax amendments.

SARS has highlighted that they are aware of the significant debt that can arise within tax returns due to how taxable income is determined. To combat this, recent legislation has been introduced to allow SARS to assist in determining the effective rate of tax an individual can expect concerning their combined sources of income.

At MMS Group, we offer leading tax consultancy services for assistance with income tax returns, VAT registration and more. For more information, please reach out.

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