Taxpayers with income from more than one source of employment should be aware that the employees' tax (PAYE) deducted by their respective employers may not be sufficient to cover their final tax liability on assessment. This is due to the way a taxpayer's tax liability is calculated during the assessment.
The South African tax system is based on the principle of combining all sources of income for a taxpayer and applying a progressive tax rate table to determine the taxpayer's final tax liability on assessment.
When you have only one employer, the total PAYE deducted should equal the tax liability on assessment and should result in no additional tax due at the time of assessment. In the case of multiple employers, each deducts the correct amount of PAYE on the salary they pay, however, when all sources of income are combined and the correct tax rate is applied, an additional amount of tax may be due at the time of assessment.
The Income Tax Act allows taxpayers who are in this situation to make additional voluntary tax payments. Taxpayers who receive a salary may request in writing that one or more employers deduct additional monthly PAYE.
A provisional taxpayer may instead pay a higher amount of provisional tax.
Requesting a Voluntary Tax Over-Deduction
To enable one or more employers to deduct additional PAYE the following steps are required:
Estimate the total taxable income for the current tax year by combining all income.
Calculate the total estimated income tax liability for the current tax year on the estimated total taxable income using the SARS tax table for the applicable tax year and deduct the appropriate tax rebate.
Calculate the estimated combined total PAYE to be deducted by all employers for the tax year (before any additional PAYE) and calculate the shortfall (difference between the total income tax liability for the current year and the estimated combined total PAYE before the additional PAYE).
Choose one or more employers to deduct the shortfall by way of additional monthly PAYE deductions over the remainder of the tax year.
A request must be made in writing to your employer/s.
Template for Employees requesting Voluntary Tax Over-Deduction
See the template here.