How Much Is Bonus Taxed In South Africa
The tax payable on a bonus does not take into account any of your potential tax rebates or deductions because they are already taken into account as part of the tax computation on your usual wage, which may explain why many people believe bonuses are taxed at extremely high rates.
Your typical wage will determine the proportion of tax you pay on your bonus; if it is high, you will pay a high tax percentage on your bonus.
The tax treatment of a bonus is the same as that of the rest of your salary; it is not a distinct form of income that is taxed differently.
Effect Of Taxation On A Bonus
Examples do the best job of demonstrating the impact of bonus taxation.
Example 1: A monthly salary of R30,000 plus a bonus of R30,000
As your yearly income is R360,000 and you fall inside the 31% tax band according to the individual tax table, you are subject to tax on your salary at the marginal rate of 31%.
As a result, your bonus will be taxed at a rate of 31%, added to your wage, and then taxed.
Your bonus is subject to a R9,300 tax (31% of R30,000), therefore you will actually earn R20,700.
The General Tax Law
According to general tax law, you are subject to taxation at the rate of the marginal tax bracket into which you are assigned. For example, if your salary places you in the 18% tax bracket (between R1 and R195,850), your bonus will be subject to that rate as well. Your bonus will be subject to 45% taxation if your salary places you in the 45% tax bracket (R1,500,001 and above). This assumes that you won’t be pushed into the next tax rate, which is covered below, by your bonus.
Prior to paying you, your company should deduct the necessary taxes. However, some businesses will overtax you each month of the year in order to prevent you from having to pay taxes on your bonus when you receive it.
Example 2: A monthly salary of R25,000 plus a bonus of R25,000
Your pay is subject to taxation at the 26% marginal rate because your yearly income is R300,000 and you are subject to the 26% tax rate.
Your bonus of R25,000, however, moves you up to the 31% tax bracket.
So, until you reach the next tax rate, a portion of your bonus will be taxed at 26%, and the remaining half will be taxed at 31%.
In this case, you will pay R7,457 in taxes on your bonus, which are calculated as follows: R1,521 in taxes at a 26% rate; and R5,936 at a 31% rate.
Total tax: R7,457, or 30% of the incentive in taxes overall.
As a result, you will get R17,543 after taxes.
Inactive Leave
Additionally, you can come across a circumstance where you are paid for unused leave.
Similar to how your bonus is taxed, you will be taxed when this leave is paid out; the payout is added to your salary and taxed as necessary.
Example 3: A monthly salary of R50,000 and an R20,000 leave payment
You are subject to taxation at the 39% marginal tax rate on your wage since you earn a yearly salary of R600,000.
Your salary is increased by your leave payout, which results in an additional 39% tax.
Your leave payout will net you R12,200 after taxes, which you will pay R7,800 (39% of R20,000) in taxes on.
It can be preferable for you to use the leave rather than having unused leave paid out, depending on your tax status.
