By: Tyrone Lowther
Following the recent budget speech, delivered by Finance Minister Enoch Godongwana, many South Africans are concerned about “tax bracket creep”, where, due to tax brackets not being adjusted with this speech, those receiving increases could end up paying more tax.
However, with smarter tax return planning, you can play your part in minimising the effects of this bracket creep and even turn tax return time into something to look forward to.
5 good reasons to file your tax return:
You could get a refund. If you’ve overpaid on taxes, you could qualify for a tax refund from South African Revenue Service (Sars), but this can only happen if you file your tax return.
It could help you with a loan application. If you need a long-term loan, such as a bond or car finance, you may need to produce a Tax Clearance Certificate to qualify. This certificate can only be received if your tax returns are up to date.
You are contributing to society. The money you pay towards your taxes goes towards paying for the maintenance of roads, schools and hospitals, and for other government services.
You could be penalised if you don’t file your tax return. If you don’t submit your tax return, you could be issued with an admin penalty, payable to Sars. This penalty is applicable to both individuals and companies who fail to file their tax returns.
You may not be able to access your retirement fund. If you need to access money from your retirement fund at any point, you may have trouble getting it without up-to-date returns. This applies even if you are retrenched, have retired, or need the money for an emergency.
Here are some pro tips for submitting a winning tax return:
Take control and learn more about tax. Knowing whether you need to pay tax, what category of taxpayer you are, what is taxable, what is tax deductible, which tax bracket you fall under, how often you need to submit tax, how to appeal a tax report etc. is the 1st step to making your tax work for you. Sars’ website has comprehensive and valuable information for individuals, as well as businesses and employers, to become more tax savvy.
Accuracy and transparency. A clear and honest reflection of your financial situation and tax status will go a long way in avoiding nasty surprises.
Update and label. Keep an up-to-date record and proof of your income, expenses, work-related travel etc. Keep work and personal expenses separate, label each trip or amount clearly and update your records at least once a month. This makes it easier to add up the numbers when tax return time comes.
Set funds aside. If there is income that you aren’t taxed on by an employer or client, calculate the amount of tax due and set it aside in an interest-bearing account the moment you receive the payment. Pay these amounts to Sars with each interim / annual tax submission.
Claim what you can. Contributions made towards medical aid, donations, retirement annuities, wear-and tear on certain assets etc. can be claimed for – meaning that, if they’re approved, you’ll owe Sars less, or even get money back. Once you’ve filed your taxes, Sars will let you know if you qualify for a refund.
To DIY or not to DIY. Filing your own tax return has been made much easier by the new eFiling system, so many taxpayers opt to do it themselves. It is, however, wise to consider using the services of a skilled tax consultant. Budget Insurance offers Legal Cover which includes the services of registered tax practitioners who provide advice, as well as assistance with tax returns and submissions.
You could claim for home office expenses. If you’ve been working from home, you can choose to claim for home office expenses if you have a dedicated office space and your company hasn’t been paying for your work resources. If you work from home, you may qualify to claim for home office expenses if:
You are self-employed.
You spend 50% of the tax year working from home.
You work in a dedicated office space in your home that resembles a real office.
You are employed and work from home 50% of the tax year, but your employer doesn’t cover office expenses.
“Tax season and the prospect of tax bracket creep needn’t be daunting. If you familiarise yourself with the fundamentals, play by the rules, keep good records, call in expert help where you need and optimise your claiming, it could well be a time of good news and welcome relief – perhaps even saving you thousands,” Lowther concludes.
Lowther is the head of Budget Insurance.
PERSONAL FINANCE