Easy steps to save tax before 29 February 2012

1. 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, 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 transaction is correctly effected/ discharged

In the event that your Family Trust does not have a bank account or should you wish to wisely invest your Trust donation, please contact Karen Venter at our offices to assist you with the transactions.

2. Save tax and plan for your retirement

It is important to note that 29 February 2012 is this tax year’s deadline for you to take advantage of the tax benefit on your Retirement Annuity (RA) contributions. If you are interested in contributing to an RA, be it to top-up an existing investment or to start investing in a new RA, time is of the essence in order to complete the process ahead of the tax year-end.

Please contact your partner to assist in computing the most tax effective level for your needs.

By following the above 2 steps to utilise tax planning efficiency, you also protect these assets from your creditors!

3. Maximise your company car or travel allowance with a detailed logbook

If you received a travel allowance during the 2012 tax year, you needed to record your mileage reading as at 29 February 2012. From 1 March 2010, it has been compulsory for taxpayers who receive a travel allowance and who wish to claim their business mileage deduction, to keep a logbook of their business mileage.

The logbook should include the date, odometer reading and purpose of trip/client’s name. Opening and closing odometer readings for each tax year must also be noted. Taxpayers who do not comply will forfeit the benefit of their allowances and could owe money to SARS on assessment.

4. 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 29 February or have I had transactions which trigger CGT already this year? Do they exceed the annual exemption of R17 500? 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?

A heads up on other looming SARS changes:

5. SARS Tax reference numbers for employees – Duties of the Employer

Only where an employee becomes liable for income tax (per the SARS regulations), should a tax number be requested from SARS. It is the Employer’s duty to review registration and submission requirements of each employee to ensure proper compliance and assisting staff with Income Tax registration where required to avoid unnecessary administrative penalties for non-submission.

6. On 1 March 2012 medical aid and deductions – Goodbye to ‘free rides’

Changes proposed in the February 2011 budget relating to the conversion of medical deductions to medical tax credits will come into effect on 1 March 2012. In general, 1/3 of your current tax deduction will be allowed as a tax credit against taxes payable to SARS. SARS will also now approve the list of medical expenses that will qualify for a deduction.

7. Dividends Tax comes into effect on 1 April 2012

SARS is replacing the Secondary Tax on Companies (STC) on company dividends with a withholding tax on dividends (WTD) which comes into effect on 1 April 2012.

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 either Alexis or Dave or our tax manager Juanita before you take action.

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