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A Fin24 user is not sure how provisional tax would impact him now that he has retired completely. He writes:
I am confused about provisional tax.
When working I was a provisional tax payer, but I have now retired completely both from my job and consulting. I am 68 years old.
My taxable income is around R120 000 per year - occasionally more - and all my income is from a retirement annuity, interest and dividends. However some years I had a capital gain from selling unit trusts, normally less than the R30 000 allowance, but occasionally more.
Will this capital gain make me a provisional tax payer? The rules for provisional tax liability don't make specific mention of capital gains. Also, in years where I creep over the R120 000 by a few thousand, would I have to register for provisional tax?
If I submit provisional tax forms, but do not fit the provisional tax criteria, would I be penalised?
I ask this because it is often impossible to know whether my taxable income will exceed R120 000 until the tax year is finished, by which time it is too late to start the provisional tax process.
READ: Dividend earnings and provisional tax
The technical department at the SA Institute of Tax Professionals (Sait) responds:
You say you were previously a provisional taxpayer and we assume it was not because you were notified by the SA Revenue Service (Sars) that you were a provisional taxpayer.
We also assume the dividends are from a South African source - in other words not foreign dividends. As such they are not relevant to the issue of whether you are a provisional taxpayer or not. Similarly a capital gain resulting from a disposal of an asset in a year, taxable or not, will also not mean that you become a provisional taxpayer.
You will only be a provisional taxpayer if you derive income which does not constitute remuneration. An annuity is remuneration and it would then only be the interest received that would not be remuneration.
READ: 6 Tips for tax filing
A natural person, such as yourself, would be exempt from payment of provisional tax if the taxable income of that person (you) which is derived from interest, amongst others, will not exceed R30 000 in the relevant year of assessment.
Now the taxable income from interest, in your case, would exceed R30 000 if the gross interest that accrued to you in this year (2016) is expected to exceed R64 500. The R64 500 is the amount of the interest that qualifies for exemption (R34 500 for persons older than 65) plus the R30 000 mentioned above. From the information provided we don’t know if that applies.
You will not be penalised if you submit a provisional tax return (IRP6) while you were not meant to do so. The only disadvantage is that Sars will treat that as an indication that you are a provisional taxpayer.
That should not have any other adverse implications, unless the tax due on assessment, if any, was not paid by September 2016.
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