Learn: Tax
How SARS Works
The South African Revenue Service collects tax, processes returns, and issues refunds. Here is how the whole thing works, step by step.
1. You earn money
Whether you receive a salary, freelance income, or rental payments, SARS considers almost all money coming in as taxable income. The tax year runs from 1 March to 28/29 February, so every rand you earn during that window counts.
2. Your employer deducts PAYE
If you are employed, your employer calculates how much tax you owe each month and sends it straight to SARS before you even see it. This is called Pay-As-You-Earn (PAYE). You never have to handle this money — it is taken directly from your gross salary.
3. SARS tracks everything
Banks, medical aids, retirement funds, and your employer all submit data to SARS. By the time tax season arrives, SARS already has a fairly complete picture of what you earned and what was deducted. This data gets pre-populated on your tax return.
4. You file your tax return (ITR12)
Once a year (usually between July and November), you log into SARS eFiling and submit your ITR12. This is your annual tax return — a form that confirms your income, deductions, and any additional claims. For most salaried employees, it is already mostly filled in.
5. SARS issues your assessment (ITA34)
After processing your return, SARS sends back an ITA34 — your Notice of Assessment. This document tells you exactly how much tax you owed for the year, how much was already paid via PAYE, and whether there is a difference.
6. You get a refund or owe money
If your employer withheld more tax than you actually owe (common if you have medical aid or retirement deductions), SARS refunds the difference into your bank account. If you owe more, you will need to pay the shortfall. Most salaried employees get a small refund.
7. Rebates reduce what you owe
SARS gives every taxpayer automatic discounts called rebates. The primary rebate (R17,235 for 2024/25) means you pay no tax on the first portion of your income. Additional rebates apply if you are 65 or older. Medical scheme credits work similarly — they reduce your final tax bill.
8. Penalties if you get it wrong
Filing late, underreporting income, or not filing at all can trigger penalties. Admin penalties range from R250 to R16,000 per month depending on your taxable income. Interest also accrues on any outstanding tax. The best way to avoid this is to file on time and be honest.
Key terms
PAYE — Pay As You Earn
“Employees' tax that is deducted from remuneration by the employer.”
“Your employer takes tax out of your salary every month and sends it to SARS for you.”
ITR12 — Individual Tax Return
“The annual income tax return to be completed by an individual.”
“A form you fill in once a year to tell SARS what you earned and what deductions you want to claim.”
ITA34 — Notice of Assessment
“The official document issued by SARS reflecting the result of the assessment of your return.”
“SARS's reply letter that says how much tax you owe or how much they are refunding you.”
This is educational content. For official advice, speak to a registered tax practitioner. You can also visit sars.gov.za for the latest information.
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