According to the Income Tax Act 58 of 1962, any person who receives taxable income of more than R30 000 other than salary/remuneration (such as investment income, business profits, rental profit, etc.), would be considered as a provisional taxpayer.
Below are practical illustration for better clarification:
1) Mr. A is 35 years old and has an annual salary income total of R150 000
Mr. A’s annual income from local interest income (R18 000), local dividends (R20 000), business profit (R4 500)
- From the above example, the local interest and local dividends will not be included in taxable income as the local dividends are fully exempt from tax for all individuals and the local interest is within the annual exemption of R23 800 (For people below the age of 65 years).
- Therefore, the taxable income other than salary will be the business profit of R 4 500.
- Please note that Mr. A would not be considered a provisional taxpayer because his total taxable income other than salary is less than R30 000 (R 4 500).
2) Mr. B is 67 years old and has an annual salary income total of R150 000
Mr. B’s annual income from local interest income (R50 000), business profit (R15 000), rental profit (R2 000)
- From the above example, R34 500 (this exemption is applicable to people who are 65 years and older) of the local interest will not be included in taxable income as it is exempt from tax.
- Therefore, the taxable income other than salary will be R32 500; a sum of R15 500 (local interest less the exempt portion), business profit of R15 000 and R2 000 rental profit.
- B would be considered a provisional taxpayer because his total taxable income other than salary is greater than R30 000.