SimplePay provides a tax trace that allows you to see how the PAYE for an employee was calculated. The tax trace can be viewed by clicking on the Tax (PAYE) link for the relevant payslip when on an employee’s profile.
The following shows an example of a tax trace for an employee. Each section is explained below.
YTD Regular Income
This is the total of all regular income from the beginning of the tax year (1 March) until the current payslip.
YTD Irregular Income
This is the total of all irregular income from the beginning of the tax year (1 March) until the current payslip.
YTD Total Income
This is the sum of the YTD Regular Income and YTD Irregular Income
Tax on Annualised Total Income
The year-to-date figures are used to project a total income for the year, called the annualised total income. This is the tax that would be payable if the employee earns the projected annualised total income for the year. It is calculated in two steps:
First, the annualised total income is calculated as follows:
(YTD Regular Income x Annualisation Ratio) + YTD Irregular Income
The annualisation ratio is not shown on this page, but it is the inverse of the de-annualisation ratio, which is shown in the YTD Tax calculation near the bottom of the page. In this example, the de-annualisation ratio is 3 / 12, therefore the annualisation ratio is 12 / 3.
Using our example, the annualised total income is (60 000 x 12 / 3) + 21 000 = 261 000 (this figure is shown in brackets)
Once the annualised total income has been calculated, the tax on this figure is calculated using the tax tables for SARS.
Tax on Annualised Regular Income
Next, the annualised regular income is calculated as follows:
Annualised total income – Irregular Income
In this example, the annualised regular income is 261 000 – 21 000 = 240 000 (this figure is shown in brackets).
Once the annualised regular income has been calculated, the tax on this figure is calculated using the tax tables for SARS.
Tax on Irregular Income
The tax on irregular income is calculated as the difference between the tax on the annualised total income and the tax on the annualised regular income.
This is calculated by de-annualising the tax on the regular income and adding the tax on the regular income. This represents the tax that the employee should have paid up until this payslip.
Tax for Current Payslip
The PAYE due for the current payslip is the difference between the year-to-date tax calculated and the tax paid on previous payslips, less any year-to-date medical aid tax credits.