[Question] How does SARS treat multiple sources of income

[Hp10Bii]

Scenario 1:
If a person earns a salary R25,000pm (pay PAYE) as one income and also runs a sole proprietor business (Profit R25,000pm) on the side
How does sars treat the multiple sources of income?
Does Sars lump it together and tax you as if you earned one salary of R50,000pm?

Scenario 2:
If a person earns a salary R25,000pm (pay PAYE) as one income and also runs a sole proprietor business (Loss R25,000pm) on the side
How does sars treat this?
Does Sars lump it together and tax you as if you earned one salary of R0.00 pm and pay you a refund of all the PAYE you paid on the Salary throughout the year when you file your annual return?
OR Does Sars apply a double standard to make sure they get the most tax out of you possible?

[Dave A]

*Subscribes*

This could get interesting!

[Andromeda]

Remuneration and income is clear; the total is what you are taxed on.

Remuneration and losses may or may not be subject to ring fencing.

This link explains when and how it is applied https://www.saica.co.za/integritax/2...sed_losses.htm
I am not aware of newer rulings, but there may well be.

[Biz_With_Bruce]

Thanks for the interesting question "HP" and thanks for the info "Andromeda"

I think the interesting part of the article was:
(As stated in the flow diagram produced by SARS which has been updated in 2009)
Step 1
"Did the person carry on a trade in respect of which an
assessed loss was incurred during the year of
assessment?" (if YES, then step 2)
This would refer to the scenario 2 from "HP"

Step 2
"Does the amount arrived at after adding back any assessed
loss (current year of assessment) and balance of assessed loss (prior Financial years) to taxable income equal
or exceed the amount at which the maximum marginal rate
of tax for individuals becomes payable?" (if NO, then no ring-fencing of the Loss)

The way I understand this is the following:
If your taxable income does NOT exceed R1,500,000 per financial year (99% of population I assume) and If I understand "the maximum marginal rate of tax for individuals" correctly
R1,500,001 and above = Tax R532,041 + 45% of taxable income above R1,500,000
Then the ring-fencing of "assessed loss" from your side hustles would not come into play and can be used to reduce your annual taxable income.

This does sound very interesting for 99% of the population if they might be considering a side hustle.

[Andromeda]

A further explanation of Sec 20A:

The 1st requirement for section 20A to apply, is that the taxpayer must fall within the highest income tax bracket during the relevant year of assessment. For the 2019 year of assessment, the person’s taxable income and any assessed loss or balance of assessed loss of the taxpayer must be equal to or exceed R1.5 million.

The 2nd requirement for 20A to apply is that the nature of the trade carried on by the natural person one of the "suspect" trades. These include the practising of any sporting activity, any dealing in collectables, any animal showing by that person, any form of performing or creative arts or any form of gambling or betting performed.

Also included are the rental of residential accommodation or vehicles, aircraft or boats (unless at least 80% of the accommodation, vehicle, aircraft or boat is used by persons who are not relatives of the natural person for at least half of the year). Farming or animal breeding will also fall within section 20A unless such activities are engaged in on a full-time basis.

The 3rd requirement is that, he or she must have incurred an assessed loss in at least three of the preceding five years of assessment, ending on the last day of the relevant year of assessment.

All 3 requirements must be met in order for the loss in respect of the specific trade to be ring-fenced.