I studied Income tax in my undergraduate degree for 3 years and found it unexciting and complex. I still do. These are the reasons many people avoid looking at their taxes and when they eventually do, they find themselves owing the Receiver of Revenue in penalty charges. The Receiver is very demanding, you do not want to cross him.
In this blog, I will try and remove the complexity and boredom out of basic Income Tax and give you tips to reduce your tax burden.
What is it anyway?
Income Tax is a tax that is charged to you as an individual. It is a direct tax that a government levies on
the income of its citizens. There is a law, The Income Tax Act, 1961, that mandates the central government collect this tax.
Simple Tip 1. Contribute more to your retirement fund
Having a pension or provident fund could help lesson your tax burden and by contributing more to it you are reducing the amount that is left over for SARS to tax you on. There are tax incentives that SARS has put in place to encourage people to plan for their retirement. Check with your employer if they have this benefit (provident fund/retirement fund) and how much you contribute. The maximum percentage you can contribute is 27.5% so you would want to check the amount you are already contributing and add to it to reach the 27.5% ceiling. Speck to your HR/Payroll to advice you on the processes you can follow
Simple Tip 2: Have a medical aid.
Having a medical aid does not only help you with medical emergencies, it helps you reduce the money you can be taxed on. By having a medical aid you get to deduct the expenses of a medical aid. What you can do is keep track of any medically related expenses such as over-the-counter medication. It is wise to keep those slips for deductions when doing your tax returns
Simple Tip 3: Have a Tax Free Savings Account (TFSA)
When you have investments and savings accounts, you are earning interest on these investments products and we know by now that the more money added to your income, the more tax you pay. By having a TFSA, the interest you are making will not be taxed. There are obviously limitations to this where you can only put in R36 000 a year and there is a lifetime limit of R500 000. Its a great option to saving and I would also recommend having one for your children
Simple Tip 4: Donate your money
This applies to donating to non-government entities that are specifically registered with SARS. You will get a Tax certificate from SARS that they will send to you every year during the tax season. There are many organisations you can consider such as SOS Children’s home , the SPCA, bursary schemes and so on. There is a full list you can look at on the SARS website
Simple Tip 5: Travel/Car allowance
SARS allows you to deduct through the expenses that you have incurred travelling for work. The requirement is that you have to keep a logbook of how much you have travelled for work and for private and personal activities. SARS does have a logbook on their website if you have a travel or car allowance. I recommend you download it and keep track of your business and travel movements to deduct the travel expenses when doing your tax returns
Let me know how are you handling your tax burdens
Yours in financial wellness,
Nthabiseng
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