Easy steps to save tax before 28 February 2017
- Did you know that the donations you make during your lifetime do not form part of your personal estate on death? And donations made by you up to R100,000 annually are exempt from donations tax?
Therefore, if applicable, you and your spouse should each be donating R100,000 per tax year to your Family Trust. And your combined estate will be reduced by R1 million over a 5-year period. That translates to an estate duty saving of R200,000!
To take advantage of this tax saving opportunity before the end of February, please contact your partner prior to proceeding to ensure the transaction is correctly effected.
- Tax Free Savings Accounts
From 1 March 2016 all taxpayers are able to make an annual contribution limited to R30,000 to this type of investment – it is in addition to the annual tax-free interest allowance for individual taxpayers. This investment will be exempt from income tax on interest. Dividends Tax and Capital Gains Tax. We believe this is an important aspect of every person’s wealth planning and you should discuss its applicability with us and your broker.
- Save tax and plan for your retirement!
29 February 2016 was the last time an individual could make uncapped contributions towards their Retirement Annuity (RA) fund. From 1 March 2016 onwards the framework for Retirement planning changed – the newly combined contribution deduction towards all pension, retirement annuity funds and provident funds will be 27.5% of all income, however, the contribution deduction will be capped at R350,000 per tax year. Time is running out to complete the process ahead of the tax year-end.
Please contact us to assist in computing the most tax effective level for your needs.
- Maximise your company car or travel allowance with a detailed logbook
If you received a travel allowance or have driven a company car during the 2017 tax year, you need to record your mileage reading as at 28 February 2017. It is compulsory for taxpayers who receive a travel allowance (or who drive company cars) and who wish to claim their business mileage deduction, to keep a logbook of their business mileage.
The daily logbook entry should include the date, odometer reading for business and private travel along with the purpose of trip/client’s name. Both opening and closing odometer readings for each tax year (and preferably per day) MUST be noted. SARS has become very strict about logbooks and the required lay-out – taxpayers who do not comply will forfeit the benefit of their allowances and could owe money to SARS on assessment.
- Review your CGT profile and ensure your liability is minimised and you maximise the use of the Exemption available
Important questions to ask yourself – > Do I intend selling my personal investments before 28 February or have I had transactions that trigger CGT already this year? Do they exceed the annual exemption of R40,000? Would the broker’s fees on selling CGT loss assets to offset the taxable gain be more than the increase in base cost should I re-purchase my investment the next day?
We suggest that where assets have been sold, you utilise the annual exemption of R40,000 to reduce any capital gain to a minimum and where there has been no CGT activity during the year, you consider selling assets to realise the R 40,000 exemption which expires on an annual basis – by doing this you save up to R 6,560 per annum in tax before the cost of brokerage on the sale and repurchase!
- Medical aid and deductions – Good-bye to ‘free rides’
Expenses which were incurred and paid for directly by you (out-of-pocket expenses) can also be submitted to SARS, provided the actual slips and proof of payment accompany the tax return – SARS will disallow claims not substantiated with the required proof.
- Enterprise Development (including Supplier Development) and Socio-Economic Development Contributions
If your entity has a February year-end and the turnover exceeds R10 million and less than 51% of the shares are owned by black shareholders, you only have until 28th February 2017 to ensure that your company has made sufficient enterprise development, supplier development and socio-economic contributions to maximise your entity’s B-BEEE ratings for the year.
This is particularly important in light of the Amended Codes of Good Practice that will be applied to your current financial year end.
- Do you, as the shareholder or person connected to the shareholder, owe monies to any of your entities that have accumulated profits? Reduce the tax due to SARS on interest that would have been raised at SARS rates on the debit loans, to avoid a deemed dividend being raised by SARS or the add back of an unproductive interest expense.
Rather consider paying dividends tax at 15% on the deemed interest adjustment at fringe benefit rates versus accounting for interest income in the entity’s hands and paying tax at 28%, to comply with SARS regulations and to ensure all debit loans are SARS compliant.
- Dividends Tax – declaration of beneficiary information to SARS
The rules require the applicable dividend declaration (DTR02) along with the supporting data for the beneficial owners (DTR01) to be submitted to SARS to effect the necessary dividends tax where payable and ensure the correct data is submitted to SARS to account for all dividends.
Please contact Juanita Roman in our Tax department for further queries in this regard.
- Outsourced payroll services – saving you time and money!
Our outsourced payroll services ensures that we work with you to maximise your tax and payroll efficiencies and ensure that all your compliance requirements have been met! We can assist with all your UIF, Workmen’s Compensation and SARS payroll nightmares to save you both time and money.
The above issues are all part of extremely complex legislation which is continuously evolving and subject to many rules. We would strongly urge you to talk to Alexis, Dave or Juanita before you take action.