What is Tax Annualisation?

Tax annualisation on staff salaries is when the tax calculated in a particular month takes the staff members salary and tax for the entire year into account in order that when the current months tax is calculated the staff members tax for the entire year (up to that date) is in line with their earnings.

This is necessary because beauty therapists and hair stylists generally earn commission and as a result their earnings differ from month to month. Therefore they often fall into different tax brackets each month, which means that by the end of the year the tax that they have paid does not tie up with the salary that they have earned for the entire year. The staff member will then either need to get a refund from SARS or pay in if they have been undertaxed.

Using the annualisation feature in ESP Wage Assistant the tax at the end of the year should match up with the staff member’s earnings.

How do you use Tax Annualisation in the ESP Wage Assistant?

In the Wage Assistant set up you need to turn on the annualisation feature.

Then you need to set the date of the first month in your wage year. This is generally 01 March for the year you are in, ie for this year it would be 01/03/2013. It is important that this date is set because tax annualisation needs to count how many tax periods there have been since the start of the tax year. Each month from the 1st of March would be one period so that there will be a total of twelve by 28 February 2014 when the tax year ends.