How a new company can save PAYE
Instead of declaring your drawings as salary, rather fix a monthly salary of, say R40 000, above what your start-up company can afford to pay you right now.
Pay the PAYE on that fixed amount and credit the balance to your loan account.
Then deduct any drawings from the loan account.
When the company can pay you a good salary of, say, R70 000 per month, declare only R40 000 for PAYE purposes and take out the rest as repayments of the loan account.
It works like this –
How does it work?
By paying a consistent amount of PAYE at a lower marginal tax rate, you avoid the high marginal tax on the high drawings in the later year.
In my example the saving is R45 000!