TIPS ON SAVING INCOME TAX – POCKET GUIDE
1. Each taxpayer is entitled to a tax rebate; this is a deduction off the tax payable. Married couples can structure their taxable income in such a manner that both can make use of the rebate.
2. Taxpayers may receive interest to the amount of R23800 (<65 years) or R34500 (>65 years) tax free. Married couples can structure their investments so both can make use of the tax free portion.
3. Taxpayers are entitled to an annual capital gain tax exclusion of R30 000. Married couples can structure their investments so both can make use of the tax free portion. A taxpayer can also structure the sale of his shares over a number of years thus making use of the annual exemption each year.
4. Take note of the tax free saving instrument that will be launched in 2015.
5. If the interest rate on your mortgage is higher than the interest you earn on your savings, then you can save a considerable amount of money and reduce your tax bill on the interest received by using spare capital to pay off the mortgage on your own property. In the current climate of low interest rates where savings earn a very poor rate of return this is likely to be worthwhile.
6. Tax relief on pension & retirement annuity contributions are available on contributions up to the annual allowance. Excess contributions are carried forward to following tax years.
7. If a member of your family has no other income, you could employ them in your family business and save a significant amount of tax for the family as a whole. Care must be taken to ensure that the arrangement is commercial and the level of pay is commensurate with the duties performed to avoid an attack from SARS.
8. Late payments of monthly PAYE & VAT amounts due to SARS attract an immediate 10% penalty and interest. Prevent this unnecessary “tax” by ensuring these payments are made on time. Also make use of eFiling, it is more convenient and VAT payments can be made up to the last day the month if you pay via EFT. (manual payments must be made by the 25th of the month)
9. Provisional tax payers can delay the payment of tax to August & February of each tax year. Pay the minimum allowable in terms of the Income Tax Act in August and top up in February. But make sure you do not under estimate your taxable income by more than 10% – underestimation triggers an “underestimation” penalty & interest.
10. If you regularly receive a tax refund when you submit your annual tax return, consider changing the way your monthly income is taxed so as to reduce the annual refund. Over paying tax to SARS during the year in not a clever investment or saving instrument. Rather “save” the tax on a monthly basis and invest the saving in your home loan. SARS selects returns, where there are refunds, for review/audit. This delays your refund even longer.
Contact Sync Accounting for professional advice.
1. This guide is produced for general guidance only, and professional advice should be sought before any decision is made. Individual circumstances can vary and therefore no responsibility can be accepted by Sync Accounting for any action taken or any decision made by any readers of this guide.
2. Tax rules and legislation are constantly changing and therefore the information printed in this guide is correct at the time of writing — December 2014.
3. Neither the authors nor Sync Accounting offer financial, legal or investment advice. If you require such advice then we urge you to seek the opinion of an appropriate professional in the relevant field. We care about your success and therefore encourage you to take appropriate advice before you put any of your financial or other resources at risk.
4. The content of this guide is for information only. Professional advice should always be sought before undertaking any tax planning of any sort as individual circumstances vary and other considerations may have to be taken into account before acting.
5. To the fullest extent permitted by law Thys Buitendag and/or Sync Accounting do not accept liability for any direct, indirect, special, consequential or other losses or damages of whatsoever kind arising from using this guide.
The guide itself is provided ‘as is’ without express or implied warranty.