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Understanding Tax on your payslip – As easy as 1 + 1


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Understanding Tax on your payslip – As easy as 1 + 1

Tax Consulting SA logo

31st May 2022


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Most employees break out into a cold sweat when they see the PAYE amount on their payslips, not to mention that they are petrified in trying to understand these calculations. 

With some basic professional training with practical examples, understanding the basics of tax can easily be learnt with basic arithmetic.


In addition, the purpose of a comprehensive tax training workshop is to demonstrate that some of the below beliefs are easily proved otherwise and clearly understood:

1.      Fringe Benefits are taxed at different rates


Many payroll and finance specialists alike believe that fringe benefits are taxed at different rates, or a different tax table is utilized to determine the tax on fringe benefits. 

With comprehensive tax training it can be proved that the tax on fringe benefits utilizes the same tax table which is gazetted for individuals on an annual basis.

2.      My income is taxed at a fixed percentage according to my marginal rate

This common misconception is totally inaccurate. South Africa’s tax table utillises a progressive system. This means that a portion of your income is taxed at a specific percentage as your income increases through the tax table. 

With the correct training, employees will understand that their effective tax rate is actually much lower than their marginal tax rate.

3.      Cost to Company is taxed higher than a Basic Plus remuneration structure

This assumption in the market is completely inaccurate. With the correct training, employees learn that tax is calculated on each payroll element and not on the remuneration structure adopted.  

The remuneration structure utilized in a company makes not different to the tax.

4.      IRP5 codes taxes items at different tax rates

Another misunderstanding is that the IRP5 codes dictates different tax rates to utilize for tax calculations. 

This is totally inaccurate as well and the specific IRP5 codes dictate how each element should be treated for tax calculation purposes only. 

5.      You need a degree to understand the mechanics of PAYE 

All employees who understand basic arithmetic can understand the mechanics of PAYE while performing practical examples as opposed to a static powerpoint presentation.  With basic mathematical skills understanding PAYE is as easy as 1 + 1.

Professional Tax Training

As daunting as it is, understanding PAYE on your payslip is not as complex as employees may think. By deconstructing the mechanics and understanding the basics with practical examples, the correct tax training can be an enjoyable experience for all employees alike. 

Whether you are an experienced payroll, HR, finance or tax professional, or a general employee, practical tax training paves a solid foundation in understanding this key component on your payslip.

Written by Tanya Tosen, Tax and Remuneration Specialist at Tax Consulting SA


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