Lesson Notes By Weeks and Term v5 - Grade 11

Lesson Video

This page supports the lesson note with a companion video and a short classroom-ready summary.

For class groups and homework, share this lesson page so learners also get the summary, objectives, and full lesson context.

Performance objectives

• Calculate gross salary from different pay structures.
• Calculate employee contributions to UIF.
• Determine taxable income.
• Calculate annual tax liability using tax tables.
• Calculate net (take-home) salary.

Lesson summary

This week, we delve into the crucial aspects of personal finance in South Africa: understanding tax, Unemployment Insurance Fund (UIF), and how these elements impact your salary. This isn't just theoretical; it's about understanding how your money works, where it goes, and how to make informed financial decisions in the future. As young South Africans, you'll soon be entering the workforce, and grasping these concepts will empower you to manage your finances effectively, budget wisely, and contribute responsibly to our society. Knowing how taxes and UIF operate will also allow you to understand your rights and responsibilities as an employee.

Lesson notes

2.1 Gross Salary: Gross salary is the total amount of money you earn before any deductions are made. It's the figure you see on your employment contract before tax, UIF, or other deductions are taken out.

Hourly Rate: If you're paid hourly, your gross salary is calculated as: ``` Gross Salary = Hourly Rate × Number of Hours Worked ``` Weekly Salary: Your gross salary is the fixed amount you earn each week.

Monthly Salary: Your gross salary is the fixed amount you earn each month.

Example 1: Thando works as a cashier and earns R45 per hour. Last month, she worked 120 hours. Calculate her gross salary.

Solution: Gross Salary = R45/hour × 120 hours = R5400 2.2 Unemployment Insurance Fund (UIF): UIF provides short-term financial relief to workers who lose their jobs or are unable to work due to illness, maternity, or adoption leave. Both the employer and the employee contribute to UIF. The employee contribution is 1% of the gross salary, up to a certain earnings threshold set by the government. For 2024, the earnings threshold is R17,712 per month. This means that even if your gross salary is higher than R17,712, UIF is calculated on R17,

7

1

2. UIF Contribution: 1% of the lesser of your Gross Salary or the earnings threshold.

Example 2: Sipho earns a gross salary of R8000 per month. Calculate his UIF contribution.

Solution: UIF Contribution = 1% of R8000 = R0.01 × R8000 = R80 Example 3: Zanele earns a gross salary of R20,000 per month. Calculate her UIF contribution.

Solution: Since her salary is above the threshold, UIF Contribution = 1% of R17,712 = R0.01 × R17,712 = R177.12 2.3 Taxable Income: Taxable income is the amount of your income on which you pay income tax. It is calculated by subtracting allowable deductions (like pension fund contributions, medical aid contributions etc.) from your gross income. For simplicity in this lesson, we will initially assume that no other deductions apply besides UIF to find the Taxable Income. We will expand on this in later weeks. Taxable Income = Gross Income – Deductions (initially only UIF)

Example 4: Using Sipho's information from Example 2, calculate his taxable income.

Solution: Gross Income = R8000, UIF Deduction = R80 Taxable Income = R8000 - R80 = R7920 2.4 Income Tax: Income tax is the tax you pay to the government based on your taxable income. SARS (South African Revenue Service) uses a progressive tax system, which means that people with higher incomes pay a higher percentage of their income in tax. SARS publishes annual tax tables that show the tax brackets and rates. We will use a simplified version for illustration: Simplified 2024/2025 Tax Table (Illustrative): | Taxable Income (R) | Tax Rate | |----------------------|----------| | 0 - 95,750 | 18% | | 95,751 - 192,600 | 20% | | 192,601 - 299,400 | 26% | | 299,401 - 410,400 | 31% |

Note: This is a highly simplified tax table for illustrative purposes only. Refer to the official SARS website for the accurate and complete tax tables. To calculate your annual income tax, you need to: Determine your annual taxable income (monthly taxable income × 12). Find the appropriate tax bracket in the tax table. Calculate the tax due based on the tax rate for that bracket.

Rebates: Taxpayers are entitled to rebates, which are amounts that reduce the total tax payable. The primary, secondary and tertiary rebates are subtracted after calculating the initial tax amount using the tax table. For simplification, we will ignore the rebates in this lesson for introductory purposes.

Example 5: Using Sipho's information from Example 4 and the simplified tax table above, calculate his annual income tax.

Solution: Annual Taxable Income = R7920 × 12 = R95,040 Sipho falls into the first tax bracket (R0 - R95,750). Annual Income Tax = 18% of R95,040 = 0.18 × R95,040 = R17,107.20 Example 6: Using the table above calculate the tax for someone who earns a taxable income of R15,000 per month.

Annual Taxable Income: R15,000 x 12 = R180,000 Tax Bracket: R95,751 - R192,600 Calculation: (R180,000 - R95,750) * 20% = R16,850.00 Tax Due: R16,850 2.5 Net Salary: Net salary is your take-home pay – the amount you receive after all deductions have been made. Net Salary = Gross Salary - Total Deductions (UIF + Income Tax) Remember that your annual tax liability (calculated above) needs to be divided by 12 to determine your monthly tax deduction.

Example 7: Using Sipho's information from previous examples, calculate his monthly net salary.

Solution: Gross Salary = R8000 UIF Deduction = R80 Annual Income Tax = R17,107.20 Monthly Income Tax = R17,107.20 / 12 = R1425.60 Total Deductions = R80 + R1425.60 = R1505.60 Net Salary = R8000 - R1505.60 = R6494.40 Guided Practice (With Solutions)

Question 1: Ayanda works part-time and earns R60 per hour. She worked 85 hours this month. Calculate her gross salary and UIF contribution.