If you’re newly graduated, have a new source of income or just started your first job, you might be looking at paying taxes for the first time. If this is the first year you have to start contributing towards SARS, don’t get overwhelmed. You aren’t the only one wondering where to start. We’ve answered the most commonly asked questions from first-time taxpayers.

Why do we pay tax?

Many taxpayers may feel that they work too hard and are frustrated when taxes are deducted from their salaries. But the purpose of tax is to finance government expenditure. One of the most important uses of taxes is to finance public goods and services, such as street lighting, street cleaning and road maintenance. The money you pay in taxes also goes towards paying the salaries of government workers like law enforcement officers, firefighters, and so forth.

We all want government services such as better education, more policing and better roads. All this costs money. The country would be dysfunctional and come to a standstill if people stopped paying taxes.

Who needs to pay taxes?

You must pay South African taxes if you work in South Africa or own a South African business. Income tax is levied on all your income and profits. You’re liable to pay income tax if you earn more than R91,250 per annum and are younger than 65.

There are various types of tax that fall under the Income Tax Act. The most relevant to first-time taxpayers is Pay As You Earn (PAYE). PAYE is when tax is deducted from employees’ salaries. The advantage of this is that tax liability for a year is paid off over 12 months, instead of a lump sum being charged at one time.

If you have a small business that you have not registered, it’s not recognised as a separate entity. So you need to include income from your side hustle or online business in your personal tax return. The South African Revenue Service (SARS) will look at the total amount of income you receive to determine which tax bracket you fall into.

How much tax will I pay?

If you’re not sure how to calculate taxable income then try one of a number of online income tax calculators, including these:

• Old Mutual
• Sage
• South African Tax Guide

Registering with SARS

When you start earning an income, you need to register as a taxpayer with SARS, even if you don’t think you’re earning enough to pay tax. You can register online or in-person at your local SARS branch. In some cases, your employer may register on your behalf.

Register for SARS eFiling

The easiest way to do this is to download the SARS app and register on eFiling. When you register for the first time and don’t yet have a personal income tax number, SARS will automatically register you and issue a tax reference number. Note that you must have a valid South African ID to do this.

Register at a SARS branch

If you aren’t able to register for eFiling, you can visit a SARS branch. Make an appointment and bring all supporting documents with you, including proof of identity and proof of address.

Filing your tax return

South African taxpayers have to fill in an annual tax return form and submit it to SARS. When it’s time to file your tax return, make sure to get your documents in order. You’ll need an IRP5. Even if your IRP5 is generated by your employer, you may still need to make additional declarations for certain forms of income and expenses. Medical aid, income from savings and investments, and charitable donations will all need to be declared and, in some cases, may even make you eligible for a rebate.

But if you earn less than R500,000 for a full year from one employer and have no other sources of additional income and no deductions that you want to claim, you don’t need to submit a return. If you are not sure whether or not you need to submit a tax return, SARS can help you find out.

The information contained in this article is for informational purposes only and does not constitute professional advice.