## Sunday, 18 May 2014

It is crucial when you are looking to increase your salary that you do a tax calculation because what you may do is push yourself into the next tax bracket, but just at the entry level, and get a larger portion of your salary taken for tax.

Example:

If your salary is R10 000 your tax payable is R793.33 because your annual salary is R120 000. This places you in the lower tax bracket because you only taxed on 18%.

If you push your salary to R15 500, this then makes your tax payable: R1902.33.

This is because you now moved yourself into the next tax bracket by earning R186 000. You now get charged 25% just by increasing your salary by R5500.

Therefore:

R120 000 - (793.33 X 12) =  R110 480.04

R186 000 - (R1902.33 X 12) = R163 172.04

Even though you increased your salary by R66 000. You only walk away with R52 692.00 because a larger portion is going to tax because you are just at the entry level of the next tax bracket.

What you want to do is be the highest point in your current tax bracket. Therefore, the annual amount you should strive to earn is R165 600.00.

This allows you to take a greater portion of your salary home by being the top level in your current tax bracket.