Being a hustler is no longer used in a derogatory term; instead, it describes a person with an entrepreneurial mindset who is a real go-getter. Many South Africans have adopted this ‘hustle culture’ where making a few extra rands is ingrained in their identity. But being a law-abiding citizen is also another important characteristic…
To remain on the right side of the law, it’s vital that you pay your taxes. Since income tax is usually automatically deducted by your employer, it can be easy to forget that you need to pay tax on your side hustle, too – you need to declare your income.
Side hustles are any form of earning a regular income that is distinct from or removed from your regular job. This can be any form of producing crafts or even generating passive income. And that is why you need to declare that you have received money in exchange for your time or knowledge.
South African Law and Side Hustles
In South Africa, a side hustle must ideally be registered as a business with the taxman – even if you aren’t turning a profit.
It can be the case that the combined income of your day job and side hustle pushes you over to a new tax bracket, but this shouldn’t keep you from complying with the regulations set forth by the South African Revenue Service (SARS).
Simply register your business via the Company and Intellectual Property Commission (CIPC) website and get your Company Income Tax (CIT) reference number. From there, you can register for eFiling.
When you file your ITR12 tax return, you must record your side hustle as income earned in your local business section. It is better to be proactive and let SARS know yourself, because other entities can inform SARS on your behalf.
What If My Side Hustle is an International Hustle?
The world has truly become a global village, a space where one person who lives on the southern tip of Africa can generate an income from a side hustle that serves people across the world.
Remote workers also fall into this category: If you are working for an overseas company, but live in South Africa, then there are certain tax implications as well.
When you are generating an income from a side hustle that is international, then you also need to keep in mind that your tax obligations are affected by the country where you earn your additional income.
South Africa has a double taxation agreement with many countries. This means that individuals won’t be taxed twice, in South Africa and the other country.
How to Remain Tax Compliant
Being tax compliant means that you need more than just a tax number. Follow the protocol and register as mentioned above.
Next, ensure you keep accurate records of your business dealings. This means using a spreadsheet or accounting software so you can see what the income and expenditure for your business are.
There are many accounting software programs that you can investigate to see if they meet your needs. You will need these accurate records to determine the taxable income.
As part of your expenses, track anything that you are using to make the side hustle possible. This can be the cost of your Internet connection, phone bills, the cost of software or raw materials to make your side hustle products, and packaging and shipping costs.
Don’t attempt to hide your income. It can be verified through banking records or other public records.
Should the tax regulating body suspect that there are any discrepancies, then the regulator may request an audit. Should they discover any concealed income, then they can fine you up to 200% of the tax owed, plus interest.
Should you have inadvertently forgotten to disclose your income from a side hustle, you don’t need to worry about this penalty. SARS has a Voluntary Disclosure Programme through which citizens are encouraged to declare their earnings while being protected from fines or even criminal charges.
Being a law-abiding hustler with a full-time job and earning some side cash is possible. Just remember to do it “by the book”. Register your side hustle, keep accurate records and file your taxes appropriately and on time!.
Being a hustler is no longer used in a derogatory term; instead, it describes a person with an entrepreneurial mindset who is a real go-getter. Many South Africans have adopted Read More
