Side hustles provide many with much-needed income injections in South Africa’s often-austere economic climate. However, multiple streams of income may result in many irregular payments, which might be more laborious to track than those emanating from traditional, full-time employment. This could lead to confusion regarding how much income you earn and the tax ramifications thereof. The overarching question thus becomes: Are you required to pay tax on your side hustles in South African law? The answer is a resounding yes.

How do I declare my side-hustle tax?

Even though income acquired through your side-hustle might be trivial and/or intermittent, it is taxable. All side-hustle income needs to be included in the Local Business section of your tax return. This is called an ITR12 – which is a tax return for an individual. Essentially, SARS labels the amounts recorded in this section as a supplement to your regular salary/income. This means that the same tax rates apply to your side-hustle earnings as they do to your main income source.

Since SARS does not differentiate between side hustle tax and formal employment tax, record your side-hustle earnings: they may take you into the next tax bracket which will require you to pay more tax. For example, if you earn R200 000 per year from your nine-to-five earnings and you earn R40 000 from your side hustle in a year, you will be taxed on R240 000. In 2024, this would take you into the next tax bracket, so it is crucial to track side hustle income as you earn.

Additionally, record allowable tax deductions, such as the operating costs of your business, which in turn include, for example, supplies or petrol. Keep evidence of these expenses. For instance, if you are an artist, keep your receipts for paint, brushes and other materials. This will ensure that you do not overpay your taxes and that you claim back the correct amounts.

If you are late to disclose your side-hustle tax, not all is lost: SARS has a Voluntary Disclosure Programme which allows you to declare previously undisclosed tax defaults while protecting you from fines and criminal charges. If you meet the requirements for this programme, it is imperative that you disclose.

What if I want to register my side-hustle as a company?

If you want to turn your side hustle into a company that has its own separate legal identity, you will need to register it with the Company and Intellectual Property Commission (“CIPC”). In this case, SARS will issue you with a Company Income Tax (CIT) number which will be relevant for your new company’s tax dealings and for services such as eFiling. Naturally your tax return will differ.

What if I provide my side-hustle services to domestic companies?

Whether your local side-hustle business is booming or whether your second-cousin’s new girlfriend is the only person to have bought one of your paintings this year, all side-hustle income must be reported. Also note that if your side-hustle services are contracted or commissioned by a domestic company (regularly or not), you might be added to its payroll. Once on the payroll, the company will deduct a withholding tax from the income earned and will supply both you and SARS with an IRP5 form. The IRP5 is a tax certificate that outlines one’s income, deductions and relevant taxes.

Even if you are not contracted by any companies and only provide services to individuals, do not withhold your side hustle from SARS. Remember that SARS can audit anybody at any time and that your entire tax history is available. SARS makes use of a range of resources during auditing, such as the deeds registry, motor car registrations and your bank statements. At worst, you may be criminally charged with tax evasion and made to pay a fine of up to 200% of the tax owed plus interest.

What if I ‘side hustle’ for companies or individuals from overseas?

Regardless of whether you tender your services in South Africa or abroad, you are required to pay taxes on your side hustles. Even without notifying SARS yourself, it may become aware of your supplementary income from other sources. For example, if your side hustle involves deriving income from an international company such as Airbnb, it might inform SARS thereof. Indeed, international companies operating in South African require users and earners to remain tax compliant as part of their terms of use.

Do I owe provisional tax?

Provisional tax must be paid in advance. It is owed when your income exceeds a certain threshold, and when said income is not earned through an employer that is registered for employer’s tax remuneration – such as a side hustle.

Regularly check whether you are required to pay provisional tax on your side-hustle earnings. If in doubt, enlist the services of a tax expert to ensure that everything is above-board so that you can keep ‘hustling’ – legally.

If you have any queries in connection with the above, please contact us here.

About the author

Jaime Uranovsky
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