How to Calculate Bonus Tax in South Africa

If you receive a bonus from your employer, you may wonder how much tax you will have to pay on it. In South Africa, bonuses are taxed differently from regular income, depending on the method your employer uses to calculate tax. In this article, we will explain the two methods of bonus tax calculation, how to work out your bonus tax manually, and how to use online tools to estimate your bonus tax.

How to Calculate Bonus Tax in South Africa

Two Methods of Bonus Tax Calculation:

There are two methods that employers can use to calculate bonus tax: annualisation and aggregation. The annualisation method is more common and usually results in higher tax withholding, while the aggregation method is less common and usually results in lower tax withholding. However, the actual tax you pay on your bonus will depend on your total taxable income for the year and your tax bracket.

Check: 2023 – 2024 SARS Monthly Income Tax PAYE Tables (Brackets)

Annualisation Method

The annualisation method assumes that your bonus is a regular monthly income that you receive for the whole year. It multiplies your bonus by 12 and adds it to your annual income to determine your tax bracket. Then, it applies the tax rate for that bracket to your bonus and deducts it from your bonus payment. This method usually results in higher tax withholding, because it pushes your income into a higher tax bracket. However, you may get a refund when you file your tax return, because your actual income for the year is lower than the annualised income.

For example, if your monthly salary is R24,000 and your bonus is R40,000, the annualisation method will do the following calculations:

• Annualised income = (Bonus x 12) + Annual Salary = (R40,000 x 12) + (R24,000 x 12) = R768,000
• According to the SARS tax deduction table for 2022/23, the tax rate for R768,000 is 36% and the tax amount is R185,713.
• Tax on bonus = Tax amount x (Bonus / Annualised income) = R185,713 x (R40,000 / R768,000) = R9,667
• Bonus after tax = Bonus – Tax on bonus = R40,000 – R9,667 = R30,333

Aggregation Method

The aggregation method treats your bonus as a once-off payment that you receive in addition to your monthly income. It adds your bonus to your monthly income and applies the tax rate for that month to your bonus. Then, it deducts the tax from your bonus payment. This method usually results in lower tax withholding, because it does not affect your annual income or tax bracket. However, you may have to pay more tax when you file your tax return, because your bonus increases your taxable income for the year.

For example, if your monthly salary is R24,000 and your bonus is R40,000, the aggregation method will do the following calculations:

• Monthly income = Salary + Bonus = R24,000 + R40,000 = R64,000
• According to the SARS tax deduction table for 2022/23, the tax rate for R64,000 is 26% and the tax amount is R11,340.
• Tax on bonus = Tax amount – Tax on salary = R11,340 – R4,340 = R7,000
• Bonus after tax = Bonus – Tax on bonus = R40,000 – R7,000 = R33,000

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How to Work Out Your Bonus Tax Manually

If you want to work out how much tax you will pay on your bonus manually, you can follow these steps:

1. Determine your taxable income for the year by multiplying your monthly salary by 12.
2. Add your annual bonus to your taxable income.
3. Using the SARS tax deduction tables for 2022/23, find out how much tax you will pay for your taxable income without bonus (as per step 1) and with bonus (as per step 2).
4. Subtract the tax without bonus from the tax with bonus to get the tax on your bonus.

For example, if your monthly salary is R24,000 and your bonus is R40,000, you can do the following calculations:

1. Taxable income without bonus = Monthly Salary x 12 = R24,000 x 12 = R288,000
2. Taxable income with bonus = Bonus + Taxable income without bonus = R40,000 + R288,

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