Unless you enjoy being hunched over your PC trying desperately to navigate SARS efiling, most of us “outsource” the extra admin in our lives to a tax consultant, in exchange for a couple of hundred Rand. Seems so worth it, right? If that’s you, hands up if you have this nagging, unanswered question floating around in the back of your mind as the days sometimes roll into a week or two and you wait for the verdict from SARS – “Do I owe them, or am I going to get a refund from them?” Biggest smiley face emoticon and “Beers on me” via your WhatsApp friend groups if it’s good news, and unhappy crying eye emoticon if it’s pay-back time.
To be fair, SARS doesn’t allow you much in the way of wiggle room anymore, when it comes to legitimate tax deductions. In this blog post we’ll cover some of the ways you can avoid paying more tax:
1.Tax-Free Savings Plan
If you haven’t already taken advantage of a Tax-Free Savings plan we are only going to forgive you if you didn’t know about it. If you do know what a Tax-Free Savings plan is, and you haven’t taken advantage of one, why not? Our Government decided to introduce Tax-Free Savings plans in 2015 as an incentive to get more South Africans to save. Any South African who is 18 years or older can contribute R33,000 (or R2,750 per month) into a Tax-Free Savings plan without having the investment gains attract any tax. You can only contribute R500,000 into a Tax-Free Savings plan over the course of your life and the money is easily accessible. Most banks and insurers offer a Tax-Free Savings plan. so you have a wide choice when it comes to providers.
2. Medical Scheme Fee Credits (MTC)
Before March 2012 SARS allowed you to use your medical aid contribution as a tax deduction. Nowadays the system has changed to Medical Scheme Fee Credits (MTC). Okay, so what do the deductions for next year look like?
For the 2018/2019 tax year (which ends on the last day of February 2019) here is what you are allowed as a credit:
- R310 per month for the taxpayer who paid the medical aid contributions
- R310 per month for the first dependent
- R209 for each additional dependent
3. Retirement Annuity
Retirement annuities sometimes get a raw deal for the following reasons:
- You can only access your money at age 55
- You can only get your hands on 1/3rd of the money (2/3rds needs to buy you a pension) on retirement
- You can’t have more than 75% of your money invested in equity funds (high growth)
But most of us are happy to live with some of the inflexibility within retirement annuity products because of the tax benefits they offer. Contributions towards a retirement annuity are tax deductible up to a limit of 27,5% of your taxable income (to a maximum of R350,000 per year). Just remember that if you belong to a company pension or provident fund, this overall limit applies. Retirement annuities are great long-term investment products, especially if you work for a company that doesn’t have a group pension or provident fund in place.
4.Claim If You Earn Commission
Most people who work in sales earn commission. If that commission earning is more than 50% of their total annual remuneration, SARS will allow them to deduct any expenses incurred in the production of that commission. A quick example. Let’s assume that you are a Real Estate Agent and you only earn when you sell a house. That would make your remuneration 100% commission based. Any money you spend to earn your bucks (like fuel to get you to your meetings and back) is deemed to be “costs incurred”. Naturally it’s a good idea to make sure you keep all your slips and invoices as proof 🙂
5.Claim If You Are Self-Employed?
Are you self-employed? Perhaps you are a freelancer or a contractor doing your own thing. If that is the case, you are entitled to claim your legitimate business expenses back from SARS. It’s important to note that these expenses need to be expenses you incurred in the production of your income. You can’t push a claim through for a family holiday, but you can push a claim through for a new laptop if you write copy for a living. Make sense?
Your travel allowance is a taxable fringe benefit (that means it is going to be added to your taxable income and taxed accordingly). In most cases 80% of this fringe benefit is taxable, but if you keep an accurate log book, to record your business travel, you can claim a travel deduction and get some bucks back from SARS.
Feeling generous and looking to do everything you can to avoid paying more tax than you need to? You can always take 10% of your taxable income and donate it to a Public Benefit Organisation (PBO). SARS will allow you to write that donation off.
There aren’t too many other ways to avoid paying less tax, but you could always double check with your tax consultant.
Until next time.
The Wise About Life Team