The expected and
unexpected

1. Who must pay income tax in South Africa?

South Africa operates on a residency-based taxation system, meaning that all residents (whether permanent or temporary) pay tax on their worldwide incomes. This income includes most type of earnings, for example:

  • employment income including salaries, bonuses, overtime and taxable benefits and allowances
  • profits or losses from a business or self-employed trade;
  • director’s fees;
  • rental income;
  • investment income such as interest or dividends;
  • annuities;
  • royalties;
  • pension income; and
  • certain capital gains.

2. What is the maximum income I can earn without having to pay income tax?

If you are under the age of 65 you only start to pay income tax on earnings exceeding R83,100 per year, or R6,925 per month. If over the age of 65 the amount goes up to R122,300 or R10,191 per month.

Taxpayers are also exempt from paying income tax on interest received on investments, up to R23,800 per year, which works out to R1,983 per month. If over the age of 65 this amount goes up to R34,500 per year or R2,875 per month.

3. What time of the year do I need to submit my tax return to SARS?

SARS has responded to current Covid-19 challenges by making key changes to the personal filing season, and introduced a 3-phased approach to this year’s filing season:

Phase 1 – Employer filing (15 April to 31 May 2020)

A renewed focus will be placed on Employers to be fully compliant in terms of their filing and payment obligations, i.e. the employer annual reconciliation process.

Phase 2 – Tax file updates (1 June to 31 August 2020)

Taxpayers will be granted the opportunity to engage with SARS to ensure that their personal tax data is up to date, e.g. banking details, postal and physical address etc. These changes can also be done on-line

Auto-assessments will also be issued by SARS to those individual taxpayers meeting certain criteria based on their income composite, thereby negating the need to render a tax return

Phase 3 – Employee filing (1 September to 31 January 2021)

Branch visits: Taxpayers will have a deadline for filing their tax returns of 22 October 2020

Via e-filing: Taxpayers are required to file their tax returns as from 1 September with the filing deadline of 16 November 2020

 

4. Do I need to submit a tax return this year, although my employer has deducted income tax from my salary each month?

Taxpayers do not need to submit an income tax return if they meet all of the following criteria:

  • Their total employment income for the year before tax is not more than R500 000;
  • They only receive employment income from one employer for the full tax year;
  • They have no other form of income – for instance a car allowance, business income, and rental income, taxable interest or income from another job;
  • They don’t have any additional allowable tax-related deductions to claim – like medical expenses, retirement annuity contributions and travel expenses.

5. Tips to pay less tax

(a) Contribute towards a retirement fund

Your contributions towards retirement funds are tax deductible up to a limit of 27,5% of your taxable income, up to a maximum of R350,000 per year.

Pension and provident fund contributions are usually structured via your employer (you will see these on your monthly payslip), but you can top-up your retirement savings yourself by contributing to a Retirement Annuity fund. This is a great way to save for your future, while also reducing your annual tax bill.

(b) Open a Tax-Free Savings Account

This is a type of savings account offered by financial institutions that invests your money in a combination of financial products such as unit trusts, bank savings accounts, fixed deposits, bonds, etc.

The difference between this and other savings or investment accounts is that all returns, for example the interest, dividends and capital gains earned, will be tax-free in your hands. This means that you’re not liable to pay tax on the growth of your investment, nor if you decide to withdraw from your account.

There’s an annual contribution limit of R36,000 per tax year, as well as a lifetime limit of R500,000. Once you have reached your lifetime contribution limit of R500,000 no further investment in tax free savings account will be allowed.

(c) Donate to a SARS registered charity

A Public Benefit Organisation (PBO) is non-profit organization, which has special approval by SARS to not pay any tax in South Africa on the donations it receives.
Your contributions to registered PBO’s are tax deductible up to a limit of 10% of your taxable income. Any donations exceeding this limit are carried forward and can be claimed as a deduction in the following tax year. To claim the tax deduction in your ITR12, you must ensure you obtain a s18A tax certificate from the PBO.

(d) Join a Medical Aid Scheme

If you and/or your dependents belong to a medical aid then you will receive in 2021, a R319 (R310 in 2020) medical tax credit per month for the first two members and a further R215 in 2021 (R209 in 2020) per month for every other member or dependent on the same policy.

(e) Keep a logbook if you receive a travel allowance

A travel allowance is a taxable fringe benefit, which means it will be included in your taxable income and you will be taxed on it. In most cases, 80% of the travel allowance is included for tax purposes. If however, you keep a logbook to record your business mileage, you can claim a travel deduction against it which could reduce your tax owed to SARS. Note you can only claim a travel deduction if your travel allowance appears next to source code 3701 or 3702 on your IRP5.

Anyone can file their tax returns, but the easiest, most efficient and reliable option is to hire a tax professional who will make sure that your returns are submitted accurately and timeously.

Experity Financial Services is a registered accounting firm with qualified tax practitioners that will guide you along every step of the process. We aim to provide you with a tax estimate within 3 workings days after we have received all the necessary information.  All packages includes payment instructions to your bank, SARS correspondence and submitting supporting documents if return is selected for audit/review.