It is the beginning of a new tax year and the best time to start with tax planning. There are several deductions available that individual taxpayers should be aware of.
Tax Free Investments:
All major institutions have tax free investment products available. These products rule has set out by SARS with the aim of protecting the taxpayer and the growth of their investment. You are allowed to contribute a maximum of R33 000 per annum and the return on the investments is tax free for the lifetime of this investment.
Venture Capital Investments:
SARS has identified a list of Venture Capital Companies and the full investment to this company is tax deductible in the year in which the investment was made. Click here to download a list of the approved Venture Capital Companies together with the minimum amount to be invested. The company will issue you with shares on which dividends will be generated.
Should you be interested in investing in residential real estate property SARS provides a capital allowance deduction of 5% per annum on the cost of the property. There are rules which have to be met in order to qualify for the deduction. Click here for more information on Section 13sex.
Retirement and pension or provident fund:
The maximum contribution to a fund is 27.5% per annum capped at R350 000. All contributions are fully tax deductible within the specific tax year.
You may contribute up to 10% of your taxable income to an approved Public Benefit Organisation. This organisation must provide you with a tax certificate. SARS also has a list available on their website of all the approved Section 18A organisations. Click here to download.
Medical scheme contributions and out of pocket expenditure paid to a registered medical practitioner can be taken into account when determining your medical deduction. The medical scheme tax credit is prescribed annually by SARS and calculated in terms of the number of dependants on the fund. Should you or any of your dependant have a disability or if you are older than 65 years, you are allowed a progressive deduction.
The following expenses are deductible: Legal expenses incurred in the protection of income, to prevent a reduction of income, to prevent an increase in expenditure, to avoid a loss or to resist a claim for compensation.
Wear and tear allowance:
Should you purchase an asset that is used mainly for business purposes, you are allowed to claim the depreciation on this asset as per rates prescribed by SARS. (“Mainly” is defined as more than 50%). This can include a laptop, cell phone or even a motor vehicle if you do not receive a travel allowance.
The deduction is allowed to the extent to which the debt has become bad during that year of assessment. The amount of the debt must have been included in the taxpayers income in either the current or a previous year of assessment and the debt must be due to the taxpayer.
If an employee received any amount in respect of services rendered or to be rendered in respect of employment, which was included in taxable income and such amount must be refunded by the employee, the repayment will be allowed as a deduction against his income. (This is often the case for financial or insurance brokers working on commission.) Proof must be provided when claiming the deduction to show that the amount was previously taxed and subsequently refunded.
An employee who earns remuneration that doesn’t mainly consist of commission, can claim a deduction in respect of certain expenditure related to a part of a private home used as a home office. The home office area must specifically be equipped for the purpose of trade and regularly and exclusively used for trade. The employee’s duties should mainly be performed in the specific home office.
Fees paid to tax accountants and tax consultants:
Taxpayers with income consisting solely of remuneration and/or interest and dividends will be entitled to a tax deduction in respect of fees paid to accountants. (This includes bookkeepers, tax consultants and other professionals or institutions that assist with the completion of a tax return.) In the case of pensioners whose financial affairs (pension, annuities, investment income etc.) are administered by a banking institution, board of executors or similar institution, the administration fees (including any fees for completion of tax returns) will qualify for a deduction.
Should you need further assistance contact Tracey Jones on +27 21 914 0261 or email email@example.com.
Article published by Tracey Jones, a registered Tax Practitioner and Director of C2M Tax Assurance.