The end of February is also the end of the tax year for individual tax payers. No matter how much you ignore it, it will not go away. SARS is watching and waiting for their part of whatever it is you earned, received or were entitled to receive. Although you can’t avoid it, you can take steps to make the pain of tax less. The Income Tax Act is a voluminous and complicated piece of legislation, but we can highlight three measures that can provide some relief at year end. These measures are of course dependant on your personal situation.
Retirement annuity contributions are tax deductible. The total allowable deduction has increased from 1 March 2016 and you can claim a deduction of contributions up to 27, 5% of your taxable income, limited to R350 000. That is quite generous. All contributions not allowed in the current year are carried forward to the following year. An additional contribution just before the end of the year can lower your taxable income.
The relief offered by Tax Free Savings Accounts are to incentivise South Africans to save, regardless of age. Savings instruments available to natural persons include unit trusts, fixed deposits or REIT’s. All proceeds, including interest, dividends and capital gains are fully exempt from tax. These investments have an annual investment limit of R33 000 and a lifetime limit of R500 000.
Donations to Section 18 Public Benefit Organisations are tax deductable, and they provide assistance to organisations that are often completely reliant on donations. So you can get a tax deduction while helping a worthwhile cause.
A few notes to keep in mind:
Remember to keep proper records for tax purposes, like logbooks, medical expenses, etc.
Make sure your prior year tax returns have been submitted and your assessments have been finalised. It is good to entrust your tax affairs to a tax practitioner, but it remains the responsibility of the taxpayer to comply with tax legislation.
The end of February is also the date when the second provisional tax returns must be submitted, if you are registered as a provisional tax payer. Do it earlier rather than later and try to be as accurate as possible to avoid penalties. It will also give you time to consider some of the relief measures we discussed.
Fortune does favour the prepared.