Once you’ve completed filing your tax return, it’s possible to find that instead of getting money back, you actually have an outstanding amount to settle with SARS. This could come as a nasty surprise, especially if you’ve (mis)calculated and had planned on spending that extra bit of income… Ouch!
If you’re confused as to why you have an outstanding bill to pay to SARS, there’s one simple explanation: you’ve underpaid tax on the income that you’ve earned throughout the year.
Here are a few reasons why you may owe SARS:
If you’ve worked for two or more employers throughout the year, and all of them have withheld PAYE (Pay As You Earn) from the salary that they’ve paid you, it is highly likely that you’ve underpaid tax to SARS for the year. You can read more about this here.
If you receive a monthly pension, but also earn an additional income from other sources, such as renting out space, receiving interest on investments, etc., it is likely that too little tax (or sometimes no tax at all) has been charged on your pension. This will result in an extra charge when you submit your tax return. For further details on this, you can read all about it here.
As a general rule, 80% of your travel allowance is subject to monthly PAYE. This is based on the assumption that you spend 80% of your travel time for personal reasons and only 20% for business.
In the event that you travel significantly more for business, your employer may opt to only tax you 20%, where the usual taxing is 80%, as explained above.
It is, however, up to you to submit your actual mileage in a detailed travel logbook to SARS at the end of the year. If you fail to submit a valid logbook, you will end up owing the taxman when you submit your return. This is the result of 100% of your travel allowance being taxed, which means that you will be obligated to pay tax on the remaining 20% (assuming 80% was subject to PAYE), which was not taxed throughout the year.
TaxTim Tip: To make this process easier for you to manage, use TaxTim ‘s FREE vehicle logbook app.
Usually, 80% of your travel allowance is subject to monthly PAYE. The assumption is that you travel 80% for personal purposes and 20% for business.
But, if your total business mileage was less than 20% of your total, you will end up owing the taxman when you submit your return. If you’re not expecting an additional debt, then this might hit you by surprise… And not the good kind.
If your work situation has changed and you are driving less frequently for work purposes than you had previously, it might be worth speaking to your employer about replacing your travel allowance with a normal salary. This will help you avoid the unfortunate event where you will owe SARS when you file your tax return.
If you have access to a car that is owned by your employer, the taxable value of the vehicle (which is also called the fringe benefit) will be added to your salary each month and it will be subject to monthly PAYE. The fringe benefit is calculated using a formula that takes the value of the car into account.
As a rule of thumb, 80% of the fringe benefit is subject to monthly PAYE. This is largely based on the assumption that you spend 80% of your travel expenses for personal use and only 20% for business purposes. If you find that you travel more for work, your employer can opt to tax you a mere 20%, as opposed to the 80% business assumption.
It is in your best interest to submit details of your actual mileage in a detailed travel logbook to SARS at the end of the year. If you don’t, you could end up owing SARS, as 100% of your fringe benefit will be taxed. This means that you will have to pay tax on the remaining 20% of your travel expenses (assuming that 80% was subject to PAYE), which was not taxed throughout the year.
TaxTim Tip: if you’re having trouble creating a travel logbook, you can make use of TaxTim ‘s FREE vehicle logbook app
If you have access to the use of a car that is owned by your employer, the taxable value of the vehicle (which is also called the fringe benefit) will be added to your salary every month and this amount will be subject to the monthly PAYE deduction. The fringe benefit is calculated using the value of the car.
Generally, 80% of the fringe benefit is subject to monthly PAYE, as the assumption is that you travel 80% for personal purposes and 20% for business purposes. Should you travel significantly more for business, your employer has the option to only tax you 20%, instead of the usual 80%.
If the business mileage was less than 20% of your total mileage, then you will end up owing SARS when you submit your return.
If your situation has changed and you are driving less frequently for work than you have before, then you might want to speak to your employer about taxing 100% of your fringe benefit (instead of the widely used 80%). This will mean that you won’t end up with an unexpected tax bill when you file your tax return.
If you’ve earned investment income above the tax-free threshold and you haven’t paid enough tax on your investment income during the year, then you are most likely to owe SARS by the time you file your return. For taxpayers under the age of 65, the first R23 800 of local interest is exempt from tax. The interest exemption for taxpayers who are 65 years and older is R34 500.
TaxTim Tip: Remember, you should be registered as a provisional taxpayer if you earn taxable investment income that is greater than R30 000 per year.
If you’ve earned some extra income by renting out a property that you own, or maybe just a room in your house, this income must be listed in your tax return. In addition, you also need to include all the rental-related expenses in your tax return. If your rental income is greater than your rental expenses, then you would have made a profit. While this is great news, it will also mean that you will have to pay tax on the profits made.
If you’ve paid too little tax (or none at all) on this rental profit, by the time you file your return, you will have a tax bill to pay when SARS assesses you.
TaxTim Tip: Remember, you should be registered as a provisional taxpayer if you earn a taxable rental profit, greater than R30 000 per year.
If you are self-employed and run a business as a sole proprietor, or earn some extra freelancing income on the side, you must record this income in your tax return. You would also need to include all business-related expenses in your tax return. If your business made a profit overall, in which case your income would need to be greater than your expenses, then you will have a tax bill to settle. This should have been done during the year via the provisional tax system. For more useful tax information for small businesses, refer to our Small Business eBook.
If you’ve paid too little tax throughout the year, then you will have a tax bill to pay when SARS issues your assessment.
TaxTim Tip: Remember, you should be registered as a provisional taxpayer if you earn any extra business or freelance income.
If you contribute to a medical aid via your employer, you will receive a fixed monthly tax credit of R319 (2020: R310) for you as the primary member, a further R319 for your first dependent and R215 (2020: R209) for each of your additional dependents. Your employer is obliged to use this credit system to reduce your monthly PAYE. You will see this credit on your IRP5 next to source code 4116. Here’s more information on tax savings as a result of your medical expenses.
If one or more dependents were removed from your medical aid during the year and you didn’t let your employer know about this change, they would not have adjusted the medical aid credit that was processed for you via the payroll. This would mean that your tax credit (i.e. your saving) would be too high, resulting in a lower PAYE for the year. In the end, you may pay too little tax for the year which SARS will be able to see when you submit your medical expenses on your tax return. In the end, you might have some additional tax to pay.
TaxTim Tip: Check your medical aid tax credits by using our handy calculator.
If you contribute to a RA via your employer, or perhaps you contribute to a RA in your private capacity but you may have requested that your employer process the deductions through the company’s payroll, your RA contributions will be reflected as a deduction next to source code 4006 on your IRP5.
As we all know, your RA contributions reduce the monthly tax that you pay on your salary (PAYE). If you stop contributing to the RA fund and neglect to let your employer know, you will end up paying too little PAYE each month. At the end of the year, the fund will issue you a tax certificate (IT3(f)), which reflects the total RA contributions you made for the tax year - this amount will be used to work out your actual tax bill for the year. As a result of the incorrect PAYE deduction during the year, you will need to cough up and pay SARS the difference when you submit your return.
We’ve noticed that in certain cases, the amount next to source code 4006 on the IRP5 is higher than the total contributions on the RA tax certificate. This may be due to fees or commission being paid over to the fund and reflected on your IRP5, but for one reason or another, not being tax deductible. The end result is the same as the previous scenario, where too little tax is deducted from your salary and you will then be liable to pay a small tax bill upon SARS’ assessment.
If none of the above situations apply to you, and you are still uncertain about why you owe SARS, don’t hesitate to Contact our Helpdesk where our team of tax experts are on standby to assist you.Image by Michal Jarmoluk from Pixabay