When you start working and earning a salary, you are most likely liable to pay tax. If you are working full-time, your company will probably pay your tax contribution on your behalf. However, if you run a side hustle, you may need to meet certain tax obligations. Retirement funds, endowments, and unit trust funds are also taxable. If you start at a new company, it is important to understand the tax implications of cashing in or moving your provident fund or retirement annuities. 

For a lot of young people, especially those who are beginning to get a handle on their finances, tax filing can be a dreaded task, and strategic tax planning and your tax obligations as a young professional may seem like a major undertaking.

When you are at the start of your career, your tax obligations are straightforward. As you move to a new firm, start an entrepreneurial side hustle or purchase a rental property, it can become more complex. There are also tax considerations on your investments.

"I’d certainly suggest if you’re earning from multiple income streams, that you start to consider structuring your income in ways that it doesn’t only come through your personal liability. Doing your homework and consulting a tax professional is essential because ultimately, you own your own destiny." - Hiten Keshave, CA(SA) and Founder of The Unconventional CA.
MORE INFORMATION

Frequently asked questions about tax in South Africa

  • What do you need for tax returns?

    Before you logon to SARS’ eFiling portal, make sure you’ve got all the documents you need to get the most of your tax return. These include:

    • Your IRP5 form
    • Logbook of your business trips if you have a travel allowance
    • Proof of medical expenses
    • Completed IT3(b) certificate (for any investments / policies)
    • Details of donations
    • Summary of any secondary income.

  • How is taxable income calculated?

    Taxable income is calculated annually by adding all your gross income streams and subtracting all tax-exempt expenses and deductions. Tax is paid on this amount according to your tax bracket.

  • What tax bracket do I fall in?

    The tax brackets for 2022 are as follows:

    ​Taxable income:

    Tax rate:

    < R226 000*

    18% of taxable income

    R226 001 – 353 100

    40 680 + 26% of taxable income

    R353 101 – 488 700

    73 726 + 31% of taxable income

    R488 701– 641 400

    115 762 + 36% of taxable income

    R641 401 – 817 600

    170 734 + 39% of taxable income

    R817 601 – 1 731 600

    239 452 + 41% of taxable income

    R1 731 601+

    614 192 + 45% of taxable income


    * Tax thresholds determine the minimum income that can be taxed.

  • What is capital gains tax?

    Capital Gains Tax is a tax on the profit received from the sale of an investment. Individuals, trusts and companies are required to pay Capital Gains Tax.

  • What percentage is capital gains tax?

    In 2022, Capital Gains Tax (CGT) is calculated as follows:

    • Individuals and special trusts: 18% of sale value
    • Companies: 22.4%
    • Other trusts: 36%

    Some assets are specifically excluded from Capital Gains Tax in certain conditions. Visit SARS’ website to find out more.

  • What about tax on second income in South Africa?

    Because taxable income includes all sources of income, your second income can expose you to higher tax rates. You should consider structuring your income streams in ways that don’t come from your personal liability, such as a registering a company.

  • What are great tax-free investments in South Africa?

    An endowment policy is a tax-smart way of investing and appreciating your capital and earning returns because they are submitted net of tax yield. A tax-free savings account provides a tax-exempt fund that can help you maximise your savings.An endowment policy is a tax-smart way of investing and appreciating your capital and earning returns because they are submitted net of tax yield. A tax-free savings account provides a tax-exempt fund that can help you maximise your savings.

Watch more episodes from the In Conversation for Young Professionals series

{[post._title]}

GET MORE PERSONAL FINANCE INSIGHTS FROM INVESTEC FOCUS

{[post._title]}

PRIVATE BANKING

For young professionals

A Private Banking partner as you build your career and future
SAVINGS

Tax Free Fixed Deposit Account

Invest in this 12-month fixed deposit and enjoy a preferential rate designed to maximise your savings potential in line with an initiative with National Treasury.

WHAT WE OFFER

You may be interested in

Disclaimer

Investec Private Banking, a division of Investec Bank Limited registration number 1969/004763/06. Investec Private Banking is committed to the Code of Banking Practice as regulated by the Ombudsman for Banking Services. Copies of the Code and the Ombudsman's details are available on request or visit www.investec.co.za. A registered credit provider registration number NCRCP9.

Investec Life Limited, a member of the Investec Group, is a registered Long-term Insurance Company (Reg.No. 1944/017130/06) and an authorised Financial Services Provider (FSP number 47702). The video on this page contains factual information and should therefore not be regarded as financial advice. Terms and conditions apply.

 

Browse further in