TAX - Your questions answered
Tax season rolls around every year, and for some, it seems an Everest-like endeavour to overcome. To assist you, our team of tax professionals have compiled a range of frequently asked questions covering all things tax-related. We hope this assists you.
1. I have received a SARS auto assessment notification. Should I simply accept SARS' assessment of my income tax for the year?
No. Your auto assessment should be thoroughly checked to ensure that all relevant tax certificates have been taken into account and all relevant deductions have been correctly included eg. Travel allowance, home office allowance, donations to charities and wear & tear. If this is not the case, the assessment should be edited to correctly reflect all relevant information and submitted to SARS.
2. What is the difference between a reimbursive travel allowance and a fixed travel allowance?
A fixed travel allowance is an allowance which is given as a fixed amount to an employee towards travelling expenses for business purposes, and is normally paid as part of the employee’s normal remuneration package. 80% of the fixed allowance received is subject to employees tax, unless the tax payer can prove (through use of a logbook) that their business travel for the year of assessment was greater than 80% of their total travel, in which case only 20% of the fixed allowance received is subject to employees tax.
A reimbursive travel allowance is an allowance which is based on the actual distance travelled for business purposes (excluding private travel). These amounts are normally paid by an employer to an employee by multiplying the actual business kilometres travelled by a rate per kilometre. A reimbursive travel allowance is non taxable if the reimbursive allowance:
– does not exceed the rate per kilometre as fixed by the Minister of Finance; and
– no other form of compensation, for example another reimbursement (other than for parking or toll fees) or a fixed allowance, has been given/paid to the employee.
3. What are tax free investments?
- Tax-free investments were launched by the government in 2015 as an incentive to encourage household savings.
- Tax-free investments include :
- Fixed deposits
- Unit trusts (collective investment schemes)
- Retail savings bonds
- Certain endowment policies issued by long-term insurers
- Linked investment products
- Exchange traded funds (ETFs) that are classified as collective investment schemes.
- Taxpayer don’t have to pay income tax, dividends tax or capital gains tax on the returns from these investments.
- There is an annual limit of R36 000 (2021) that can be invested in a tax-free investment.
- There is a lifetime limit of R500 000 that can be invested in a tax-free investment.
4. What documents are needed to complete a tax return and how long do I need to retain them for?
- Certificates received for local interest income, foreign interest income and foreign dividend income
- If you are married in community of property, the certificates received by both you (the taxpayer) and your spouse are required
- If you married out of community of property, only the certificates that you receive are required.
- IRP5: This is the employees’ tax certificate your employer issues to you.
- Certificates you received for local interest income earned.
- Any other documentation relating to income received or accrued, such as remuneration that has not been reported to SARS by your employer, or business or investment income, etc.
- Details of medical expenses paid and medical scheme contributions made.
- The relevant certificates reflecting your retirement annuity fund contributions made.
- A logbook and other documents in support of business travel expenses (if the travel allowance is part of your remuneration or if you have the right of use of a company car taxable benefit).
- Any other documentation relating to the allowable deductions you wish to claim
5. Do I need to pay income tax for the current tax season?
- Are you younger than 65 years of age and earning more than R83 100?
- Are you older than 65 years of age and earning more than R 122 300?
- Are you older than 75 years of age and earning more than R 136 750?
If you answered yes to any of the above, you are liable to pay income tax for the 2020 year of assessment.
6. I have heard that certain people do not need to submit a return, is this true and would this apply to me?
You do not need to submit a return if ALL of the following criteria are met :
- Your total employment income / salary for the year (March 2018 to February 2019) before tax (gross income) was not more than R500 000; and
- You only received employment income / salary for the full year of assessment (March 2018 to February 2019) from one employer; and
- You have no car allowance/company car/ travel allowance or other income (e.g. interest or rental income); and
- You are not claiming tax related deductions/rebates (e.g. medical expenses, retirement annuity contributions other than pension contributions made by your employer, travel).
7. Is there a difference between provisional tax and income tax?
Provisional tax is not a separate tax from income tax. It is a method of paying the income tax liability in advance, to ensure that the taxpayer does not remain with a large tax debt on assessment. Provisional tax allows the tax liability to be spread over the relevant year of assessment. It requires the taxpayers to pay at least two amounts in advance, during the year of assessment, which are based on estimated taxable income. A third payment is optional after the end of the tax year, but before the issuing of the assessment by SARS. On assessment the provisional payments will be off-set against the liability for normal tax for the applicable year of assessment.
8. Key Filing Deadlines:
Personal Income Tax :
- 1 September to 16 November – taxpayers who file online
- 1 September to 22 October – taxpayers who cannot file online can do so at a SARS branch by appointment
- 1 September to 29 January 2021 – provisional taxpayers who file online
Provisional Income Tax :
- The first provisional tax payment must be made within six months of the start of the year of assessment. For years of assessment starting March, this will be 31 August.
- The second payment must be made no later than the last working day of the year of assessment. This will be 28/29 February.
- The third payment is voluntary and may be made within six months of the year of assessment, in any other case.
The Income Tax return (ITR14) must be completed and submitted within 12 months after the financial year end of a company.
In addition to annual returns, every company is required to submit provisional tax returns :
First payment – within six months from the beginning of the year of assessment
Second payment – on or before the last day of the year of assessment
Third payment – seven months after the year of assessment for taxpayers with February year-end and six months after year of assessment for all other cases