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Tax for lower-income earners to be phased in over three years
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May 22, 2010
By Laura du Preez
Lower-income earners who earn more than the tax threshold but avoid tax because they are paid by multiple employers will in future pay tax, but this tax will be phased in over three years.
The National Treasury is proposing that the Standard Income Tax on Employees (Site) system be phased out, but anyone who receives payments from an employer who is responsible for deducting Pay As You Earn tax from employees will have to be registered as a taxpayer.
Taxpayers who receive payments from multiple employers and who are taxed only in terms of Site can earn a total income that exceeds the tax threshold and not pay tax.
The tax threshold - the amount of income you can earn without paying any tax - is R57 000 a year for individuals who are aged below 65 years.
For example, if you earn R50 000 from one employer and R40 000 from another employer and they are each unaware of your other source of income and assess your income in terms of the Site system, both employers are likely to pay you without deducting any tax.
Many people who earn amounts below the Site threshold from multiple sources are not registered as taxpayers and therefore do not submit a tax return, avoiding tax that is by right due.
But the South African Revenue Service (SARS) plans to make it compulsory for your employer to provide SARS with the information it requires to register you for tax, regardless of whether or not you earn below the tax threshold. People with multiple sources of income that in total exceeds the threshold will have to submit a tax return and pay tax when it is assessed.
To soften the blow for people in this situation who will suddenly be liable for tax they have not paid previously, the National Treasury says in the explanatory memorandum to the Draft Taxation Laws Amendment Bills 2010 that it is proposing that the tax for which these taxpayers will become liable be phased in over three years, with one-third of the additional tax liability becoming due in the first year (the 2011/12 tax year), two-thirds in the 2012/13 tax year and the full liability in the 2013/14 year. The Site system will therefore be phased out over these three tax years.
The treasury says Site is being phased out because the threshold below which you do not pay tax is almost equal to the level below which Site applies.
Site applies to income below R60 000 a year.
In its explanatory memorandum, the National Treasury says Site was introduced in 1988 to limit the number of personal income tax returns that taxpayers file each year and in this way free SARS staff to deal with more complicated returns. But since the implementation of eFiling, this is no longer necessary.
SARS allows people who earn up to R120 000 a year from a single employer and who have no additional income or deductions not to file a tax return, although they are liable to register as taxpayers.
  
 
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