I don’t know many people that enjoy submitting their tax return. Having said that, I know many people who like the results of their labour. There are 3 types of results when it comes to tax returns. 1. You must pay a certain amount to SARS. 2. You receive an amount back in the form of a refund. Or 3. A “nil result” meaning you owe nothing and you are owed nothing.
What’s the point?
All countries run on money. As with any business, income is critical. No income no spending – not a great plan for a busines (or country). South Africa relies heavily on the income of personal tax. It forms the bulk of the income. Tax season which runs from July to November annually is SARS biggest income months of the year.
The point? You pay taxes in order to run the country.
That is great knowing that but i got a refund. How does that work? You may have got a refund but many individuals do not and have to pay in a fairly substantial amount of money. There are a number of reasons for this, but another time.
A refund happens when the amount you have paid through the year exceeds the amount due after all the amounts have been claimed. Lets take a simple example. Joe is an employee of a company and is paid the amount of R 10 000 monthly.* He pays R 1 000 PAYE (personal tax) every month. He receives R 9 000 in his bank account as a esult of the deduction. Joe is the principal member of a medical and has one dependent.
In his tax return, Joe has paid R 12 000 personal tax through the year. As tax payer, Joe is given a medical tax credit for himself of R 300 and the dependent of R 200.* This amount is per month. The total amount for the year is R 6 000. The net result of the claisms and the tax paid, is that Joe has over paid by R 6 000. SARS with refund Joe this amount once all the numbers have been checked.
Because of claims made, it results in the tax payer “over paying” and SARS are happy to pay this back to tax payers once all the submissions have been received and verified.
*Amounts are fictitious and are used for illustration purposes. Please consult with your accountant or Sars directly to obtain actual figures. UIF has been omitted for ease of illustration purposes.