We get emails daily from prospective clients asking ask how much tax refund or return they can get. There is a misconception amongst taxpayers that they are entitled to a refund from SARS because they have been good taxpayers all their life.
We have written an article about this previously, click here to view it. But I’ll try here again to explain how this thing works in different terms.
For the period 01/03/2012-28/02/2013 (The 2013 tax year), if you earned anything above about R5300 per month, PAYE was deducted from your monthly salary. Your employer paid it over to SARS on your behalf. Now comes the end of the tax year, your employer sends to SARS a recon of your total income earned and your total PAYE paid to SARS for each employee.
You get a copy of this recon (Commonly called an IRP5). In the majority of cases, the tax you paid to SARS throughout the year in the form on monthly PAYE is sufficient to cover your yearly tax liability. So you will get no money back, and you will have to pay in no money additionally to SARS.
Why people get money back is because they claim certain deductions which lessen their tax liability. These deductions are for example, contributions to pension funds, medical deductions, etc.
So a guy earning R300 000 per year, and who paid tax on this R300 000 throughout the year, and he will claim say R50 000 deductions (By whichever means is legally allowed for him) and he will now only have to pay tax on R250 000. But he has already paid tax on the R300 000. So the difference in tax on R300 000 and tax on R250 000 is what he will get back as a refund.
But if this whole explanation of mine is understood correctly, along with the other article previously authored, then one will see that he didnt actually get back any money back. He overpaid on his tax, and now he is getting it back. He is getting his own money back. This point cannot be stressed enough, SARS DOES NOT GIVE AWAY FREE MONEY. The refund you get is the excess tax YOU paid throughout the year. ITS YOUR OWN MONEY YOU GETTING BACK.