Tax Savings: Tips for Year-end
Tax Savings: Tips for the Tax Year-end
Question: I am a small business owner and dread this time of year. Can I maximise tax savings to ease tax pain? We all know the feeling but start by doing it early, when that is not possible anymore let us focus on tax savings.
Before I look at easing the pain and maximising tax savings, although the official tax year-end date for individuals and companies with a February year-end is 28 February, some financial institutions and public benefit organisations have a submission cut-off a few days earlier to have sufficient time for processing and administration. This is important to remember when maximising your tax savings.
How to maximise tax savings
- Retirement contributions
You can deduct once-off/ top-up contributions to a pension fund, provident fund, and retirement annuity, but the total deduction allowed in a tax year should not exceed R350,000 or 27,5% of the higher remuneration or taxable income. This is recommended for entrepreneurs without a pension fund and employed individuals who do not have sufficient retirement savings. Ensure that your tax certificate reflects all your contributions.
- Donations in terms of Section18A
Donations to authorised Public Benefit Organisations (PBO) are deductible and is limited to 10% of taxable income. The organisation must have a PBO number, and you must request a tax certificate.
- Tax-free savings accounts
You can invest up to R36,000 annually (and R500,000 over your lifetime) into a tax-free savings investment where you will pay no income tax, capital gains tax or dividend tax on the returns you earn, provided you keep to the annual limits.
Make year-end tax process smooth
- Obtain and file documents
Make a list of all the documents you require for tax purposes and tick them off as you receive them. After the tax year-end, you will be receiving tax certificates from the banks, financial institutions, medical aid, retirement funds etc. The same applies to slips for medical expenses, fuel, other claimable expenses as well as invoices for rental income and IRP5’s. File all the electronic documents in a tax folder, requesting outstanding documents well in advance.
- Review your tax certificates
Don’t just assume the figures on your IRP5’s and tax certificates are accurate and complete, check them back to your bank statements, payslips, investment statements etc.
- Review your tax returns and assessments
SARS is implementing a drive towards auto-assessments where most of your tax-related numbers will be pre-populated using information submitted by relevant third parties. In addition to checking these figures before you submit your return, ensure that your return or assessment reflects all your payments made to SARS. The accuracy of your tax return is ultimately your responsibility.
- Adhere to SARS deadlines
Adhere to the SARS deadlines for submitting returns and making payments. Do not assume it is the same as the previous year – check all the information you are submitting. You do not want to pay penalties! Above all, adhere to the deadlines and invest that money!
CA(SA), Financial Consultant, Speaker and author of ‘Financially Fit and Wealthy’ www.financiallyfitlife.co.za