1.5 Tax deductions

• UIF: Unemployment Insurance Fund: A government-run insurance fund which employers and employees
  contribute, so that when employees are retrenched they can collect some earnings (a portion) .The
  employee contributes 1% and the employer contributes 1% of basic salary.
• Pension fund: It is a fund established by an employer to facilitate and organize the investment of
  employees’ retirement funds contributed by the employer and employees.
• Other deductions like medical aid contribution, insurance policies, maintenance, house payment, car
  payment, etc.
• PAYE: abbr.) Pay as you earn: tax taken off your earnings by your employer and sent to the South African
  Revenue Service before you are paid (the balance).
• Net salary: The amount an employee “takes home” after income tax has been deducted.

For example: Determine the tax that a teacher , age 41, a member of GEMS, will pay per annum if his
taxable income is R312 000 per annum for tax year 2020.

• Answer: He will pay R63 853 + 31% of taxable income above 305 850
  Amount over R305 850 = R312 000 – R305 850 = R6150
  R6150 × 31% = R1906,50
  Total tax before rebates = R63 853 + R1906,50 = R65 759,50
  Since he is under 65, he gets only the primary rebate
  Rebate = R14 220
  Total Tax Payable = R65 759,50 – R14 220 = R51 539, 50 pa

Steps for calculating income tax