Voluntary Tax Over-Deductions

What is the Voluntary Tax Over-Deduction system item?¶

The Voluntary Tax Over-Deduction (VTOD) item is used to voluntarily deduct more tax from an employee's salary than what the system has calculated. The VTOD system item can be used in various instances, for example, an employee who has other income sources outside of their employment. Instead of having to pay a large amount of additional tax on other income upon assessment, the employee can choose to make additional tax payments throughout the year, by using VTODs.

How do I use the VTOD system item?¶

To add a voluntary tax over-deduction on SimplePay:

Go to Employees on the left-hand menu, and select the relevant employee.
Click on Add next to Regular Inputs.
Select Voluntary Tax Over-Deduction under Deduction.
Enter the amount.
Click Save.

How does a VTOD differ from PAYE and Provisional Tax?¶

Pay As You Earn (PAYE) is a method of collecting income tax that applies to employment earnings. Income tax is paid as the income is earned, and an employer is obligated to withhold income tax and pay it over to SARS.

Provisional tax is a way for SARS to receive payments of a tax liability in advance, from taxpayers who earn income other than remuneration (e.g. investment, rental, or business income). Since there might not be any withholding tax on such other, non-employment income, the tax liability might not be paid throughout the year. Therefore, instead of receiving PAYE (which is withheld only for employment income, and paid over by employers every month), SARS receives the tax in two (or three) provisional tax payments during the tax year.

A VTOD is an optional additional tax payment that allows employees who are expecting further taxation upon assessment to choose to make voluntary tax payments through payroll to account for this.

Please note: Since VTODs will increase the PAYE (or employees' tax) paid during the year, they will result in smaller provisional tax payments having to be made.

Can VTOD amounts be used to reduce PAYE on future bonus or lump sum payments?¶

No. A VTOD cannot be used to reduce PAYE on future payments as it is not accumulated over a period to be used on a future payment. Instead, it is paid over to SARS, along with PAYE, when the monthly declarations are completed.

You can, however, use our savings system item for this purpose. You can create a custom item based on the savings item (which will allow you to choose your own name). This item will result in a regular deduction on the payslip. The balance of this savings-like item can be paid out anytime. This payout will not be taxed as the deductions made on previous payslips were from after-tax income. Therefore, you can pay out the balance (of the custom savings item) on the desired payslip, and the employee will receive the full amount.

Please see the help pages below for further guidance on using the savings and custom items.

Is a written agreement required for applying a VTOD?¶

Yes, an employer may not make a VTOD without the employee's written consent. A VTOD is not a tool for an employer to manipulate tax percentages but a mechanism available to employees to better manage their personal tax obligations.

Can a negative amount be entered for the VTOD to affect the PAYE calculation?¶

The system will allow you to enter a negative VTOD amount, which will reduce the employee's PAYE. However, this is not the intended use. A negative VTOD is allowed only to make a correction for a historic VTOD amount that was too high, in the case of a manual error. It is a direct manipulation of the PAYE amount, and SARS makes no provision outside the prescribed PAYE calculation methods for directly reducing the PAYE amount with a negative adjustment. This will also result in errors when completing your filing declarations as SARS does not accept a negative VTOD amount upon submission.

How are VTODs reported to SARS?¶

Both VTODs and PAYE are reported under the same SARS tax code, 4102.

Can an employee request that a VTOD be stopped?¶

Yes. As this is a voluntary contribution/deduction initiated by the employee, they can make a written request for it to be stopped.

Can I edit or remove a VTOD item?¶

If a VTOD item is included in a finalised payslip, it cannot be edited or removed. Therefore, first, ensure that the payslip is unfinalised.

Please note: If this is a historical edit, i.e. not part of your current payroll period, please contact the support team for assistance. We strongly advise against unfinalising payslips for past pay periods.

To edit or remove a VTOD item:

Under Regular Inputs, click on Voluntary Tax Over-Deduction.
Edit the amount (if a correction is required).
Click Save or Remove.