MD’s Top 10 Tax Savings Tips Pre Budget on 26th February
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 where you have a 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 or R250,000 for larger estates!
However, if your Trust or a company in which you or your Trust owns more than 20% of the shares owes you more than R1 290 320, this donation exemption should rather be utilised to reduce the new deemed donation payment (Section 7C).
For a reminder about the importance of this new section (introduced in the 2017/2018 Budget), click here for our previous advices Section 7C
Should the donation be used to fund an asset purchase, this may result in other tax implications which need to be considered and you should contact us to advise you on the best structure.
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 treated.
Donations to SARS registered charity (Section 18A PBO) are tax-deductible up to a limit of 10% of your taxable income. Any excess may be carried forward to the next tax year
2. Tax-Free Savings Accounts
All taxpayers are able to make annual contribution limited to R33 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 it’s applicability with us and your broker.
Here are two important tax-saving tips which will also assist in growing your wealth:
- Maximise your Retirement Annuity Contributions – all pension, retirement annuity funds and provident funds will be limited to 27.5%of all taxable income, however, the contribution deduction will be capped at R350 000 per tax year. Top-up your retirement savings now!
- Highly tax efficient Section 12J (S12J) investments – The main features include up-front (100%) tax relief, no recoupment if the investment is held for at least 5 years but CGT would be payable when the investment is liquidated. This is a maximum 45 % tax saving now with a potential CGT liability of 18% (at the current rate) after 5 years – REAL saving of 27% (for an individual) together with growth in the investment. This is a highly attractive and effective tax-saving and wealth-generating investment. Certain minimum investment contributions and periods would apply but it is fund-dependent (limited to R.25m per individual p.a.).
Time is running out to complete the process ahead of the tax year-end as some funds would need contributions to reflect in their accounts by 20th February to ensure timeous processing of the contributions before the end of the 2020 tax year. We urge you to contact us urgently to discuss the most tax-efficient contribution for your needs.
4. Change the lives of your employees – consider education bursaries
With certain cost of education, help relieve some of the financial stress of your employees – with education bursaries for your staff/their relatives, you can wipe away these stresses and be ‘Boss of the year’!
Certain requirements and conditions apply – contact us to find out how you can assist your employees in this regard.
5. 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 2020 tax year, you need to record your mileage reading as at 29 February 2020. 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 the 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.
6. 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 that 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 R40 000 exemption which expires on an annual basis – by doing this you save up to R 7 200 per annum in tax before the cost of brokerage on the sale and repurchase!
7. 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.
8. Enterprise Development (including Supplier Development) and Socio-Economic Development Contributions
If your entity has a February year-end and the turnover exceeds R10m and less than 51% of the shares are owned by black shareholders, you only have until 29th February 2020 to ensure that your company has made sufficient enterprise development, supplier development and socio-economic contributions to maximise your entity’s B-BBEE ratings for the year.
For an easy way to maximise the efficiency and benefit of your ED and SED contributions contact, CSI Link, here – email@example.com
9. Do you, as the shareholder or person connected to the shareholder, owe monies to any of your entities that have accumulated profits?
Contact us to discuss the most tax-efficient structure to avoid deemed dividends and unproductive interest claims from SARS.
10. Outsourced payroll services – saving you headaches, time and money!
With constant legislative changes, do you have spare time to stay on top of the payroll game or is this just another headache? Our outsourced payroll services ensure 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 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, Juanita, Fatima or Danie before you take any action.
Contact us to help you to be the best you can be!