Best Tips for Paying Less Tax
With the current budget speech, SARS is pressing forward with measures to ensure the maximum tax is collected from South Africans.
As a taxpayer, you should be wise to ensure that you are able to limit your tax liability in a legal and compliant manner. This can be achieved by ensuring you are claiming the maximum deductions allowed by SARS.
In this article, we cover some tips to ensure you reduce your tax liability for this tax period.
Retired Fund (RAF) Contribution’s
As a contributor to an RAF policy, you can claim this as an expense however there are limits. If you contribute more than the required amount towards your RAF, the excess contribution may be claimed as an expense against any lump sum you withdraw before or at retirement. Contributions above this limit made directly by your employer are also taxable as a fringe benefit in your hands, but the contributions are also deductible in your hands too, subject to the annual limits.
Excess contributions in one year can also be carried over and deducted in the next year.
Tax-Free Savings Accounts
Currently, the government is rewarding taxpayers for saving their money. With this tax legislation, you can save up to R36K per annum and R500K during your life and not be taxed on these amounts.
But, be careful as anything above these amounts are tax heavily by SARS.
Give back to Charities
If you donate to a registered charitable organization for example St. Philomena’s Children’s Home, SARS allows you to deduct the donation amount from your taxable income.
A few things to note is that the amount is limited to 10% of taxable income and ensure that you request a tax certificate from the organisation you are donating towards.
Medical Aid Cover
If you are 65 or older you qualify for the basic monthly tax credit for contributions paid to a medical scheme – R310 for yourself as a principal member (assuming you are paying the contributions), R310 for the first dependent (R620 in total), and R209 for each additional dependent.
Let’s say that you are 65 years or older, then you can qualify for a monthly tax credit for yourself and your dependents. The amounts range from R310 for you and R310 first dependent then R209 for other dependents.
PS> If your spouse or your child has a disability then they are allowed the same benefit as stated above.
Those taxpayers that are under 65 with no disability qualify for the standard monthly medical scheme credits (the R310 and R209), and then a 25% credit of the contributions that exceeds four times the amount of the medical scheme contributions tax credit, and all qualifying medical expenses that exceed 7.5% of the taxpayer’s taxable income.
As an employee, you may be required to travel for business and the company will provide you with a travel allowance to cover your costs incurred. Expenses against this traveling may be claimed deducted from your tax payable.
To ensure you can claim this deduction it is imperative a logbook is always kept to record your business and travel-related expenses.
Contact us for your free logbook by emailing us at email@example.com
Taxpayers who receive a commission as part of their salary package may deduct business expenses against their taxable income. However, you are only allowed to claim these expenses if your commission income exceeds 50% of your total annual income.
Individual Business Owner (Sole Prop)
As a business owner you run into quite a few expenses to ensure the business continues to run each day. These items can be claimed as tax deductions used in generating income for the business. Some examples include:
- Travel & Accommodation
- Cellphone and Data Charges
- Rental Space for Offices
- Stock required sell
- Depreciation on assets (example trucks)
Please ensure that all supporting documents are maintained and kept should SARS request these in an Audit.
Rental Income from Property
As an investment vehicle, most South Africans invest in property and receive a rental income. SARS allows you to deduct certain expenses in relation to the generating on that rental income. These include the following items:
- Interest Paid
- Maintenance Costs
- Security Costs
- Property Management Fees
Again, you need to ensure you retain these invoices so that you can claim for them.
There you have it, some great tips to ensure you reduce your tax liability next tax season. It is important to note that it is best to have a qualified tax practitioner on your side to ensure you get the maximum refund and stay compliant always.[This list is not a comprehensive list and we advise that you always check with your tax expert before filing your returns.]
Need help with your personal or business tax? As qualified, skilled and professional accountants you get quality work with great personalized service always at KZN Bookkeepers. Our clients range from Chartered Accountants, Business Owners to Doctors. Contact us today for a free consult and let us help ensure your complaint.