Filling in your tax return does not rank high on most people’s list of favourite activities. But, although there is always the potential lure of receiving money back from the South African Revenue Service, handing in your tax return is a legal requirement. Luckily, it usually ends up being easier than you think.
You must fill in your tax return if you earn a salary of more than R60 000 a year; if you earn commission or have a car allowance, even if your income is less than R60 000; if you receive interest and foreign dividends of more than R16 500, or R24 500 if you are older than 65; if you own a business; or if you have a tax return, regardless of your income.
If you worked for less than a full year, tax is deducted from your income as if you were employed for the full 12 months, but you can claim a rebate on the extra tax payment.
You can apply for an extension, but if you miss the date SARS gives you, you are liable for penalty tax.
The first part: personal details
You must ensure your personal details are correct on the return.
If you want any refund to be paid directly into your bank account, check your banking details. You might need to submit a cancelled cheque. Once you have completed your tax return, remember to sign it. If you submit the return without a signature, it will be returned to you for signing and it will take longer to process.
Your income
You will need an IRP5 certificate from your employer and you will need to submit this with your tax return.
You will need to fill in the industry in which you work, choosing one of the options SARS provides. If you are a teacher, for example, you would indicate “educational services”.
Write down the name of your employer and the period you worked there — the same as the period stated on the IRP5. If you changed jobs during the year, you would write down each employer’s details separately.
Copy the information from your IRP5 into this section of your tax return, including — very importantly — your taxable income.
Your IRP5 should indicate how much tax you have paid already and you should copy this information into the relevant section of your return.
If you received income other than from your employer, such as interest on savings, share dividends and rent, you need to declare this on your return.
Are you liable for capital gains tax?
Capital gains tax is a levy on a transaction on which you made a capital gain. This is the difference between the price you paid for an asset and the price you sold it for.
You can make a gain of R15 000 a year in the local share market before you have to pay capital gains tax.
For foreign shares and interest, the annual exemption is R3 000 a year.
If you are selling your home, you can make a profit of R1,5-million before you need to pay tax. But this applies only to your primary residence. If you have a flat for investment purposes or a holiday home and you sell either of these there is no tax exclusion.
Now for the good part: the deductions
You can claim deductions for retirement savings and medical expenses.
You might be able to claim more if you are a provisional taxpayer and if you have a travel allowance.
Retirement tax
While you are working, you can save up to 15% of your income tax-free through a pension or provident fund or through a retirement annuity.
You will need to submit proof of your payments to claim this deduction. Usually, the fund will send you a letter showing how much you have contributed. If your employer funds this or the amount is deducted from your salary, your IRP5 will show this.
Using your travel allowance
You are allowed to claim a portion of your travel allowance for tax purposes. Even if you do not keep a logbook of your car’s mileage, you need to have odometer readings for the end of the previous tax year (February 28) and the beginning of the current year (March 1).
If you haven’t kept records of your mileage, the first 18 000km you travelled in the year will be deemed to be for private purposes. Only once you have reached this threshold will you be able to claim business mileage, up to a maximum of 14 000km a year.
Keeping a logbook is worth the hassle because you can claim all your business mileage. Get in the habit of taking an odometer reading every morning before you leave for work and before you take any other trips during the day.
You should keep records of any repairs or maintenance you carried out on the car and your proof of purchase of the car.
Medical expenses
If medical expenses for you, your spouse and your dependant children make up more than 7,5% of your taxable income, you are allowed to claim this amount as a medical allowance.
This amount applies only to expenses not covered by your medical scheme. If you are older than 65, or either you or your child has a disability, there is no limitation.
The sum of R530 each can be deducted for the principal member and first dependant of a registered medical aid scheme and R320 each for additional dependants. Sometimes you can claim the full amount for contributions paid to a medical scheme, for example, if you or one of your dependants were disabled.
Getting help with your tax return
If you receive a salary, contribute to the company pension fund and keep a logbook for your car — if your tax structure is fairly straightforward — you can do it yourself.
SARS will send you information on how to fill in your return. You can phone or visit SARS consultants, who will tell you exactly what to do and how to do it.
If you have a business, a trust fund or receive income from different sources, you might need to get help from an accountant.
New-look returns
If you haven’t noticed yet, your income tax return has not arrived in the post. There is no reason to panic, however, because no one has received this year’s tax return, which will only be sent out in June.
The reason is that the SARS is introducing a new income tax return process.
The new returns will be simpler and easier to complete and the filing will be done in a new way.
Rumour has it that it will be quite revolutionary for South Africa. Who said tax returns were boring?
What is provisional tax?
Not everyone fills in the same tax return. Most people are salaried employees and will fill in an IT12SS or an IT12S form.
But, if you are a contract worker, earn farming income or commission, own your own business, earn taxable dividends or interest income above a certain amount, you will be a provisional taxpayer.
You must register at your local SARS office within 30 days of qualifying as a provisional taxpayer.
Provisional tax is meant to help people who do not pay tax every month to meet their tax obligations. Provisional tax is paid every six months.
Sometimes a third payment is made to settle outstanding obligations from the previous tax year. By paying in a third time, you can avoid paying interest on a late payment. Provisional taxpayers must submit a return in July, like everyone else, but will submit income and expenditure statements in August and February, which is when your provisional tax payments are due.
The advantage is that provisional taxpayers are allowed to deduct expenses incurred while earning an income.