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Tax filing season is officially open. And although Acting Commissioner of the South African Revenue Service (SARS) Mark Kingon has noted you don't have to file a tax return if you earn less than R350 000 per year from a single source of income - and have no allowances - you may still choose to file if you believe there are deductions you can claim.
Tax consultants Vincent Radebe, Phumla Taho and tax attorney Darren Britz from Tax Consulting South Africa, share five ways that tax payers can maximise their refunds from SARS.
1. Medical credits
Taxpayers can claim deductions for their contributions to medical schemes, Radebe explains. Depending on the number of members on your scheme, you could claim more credits.
"The more members or dependents there are for more months during the year of assessment (1 March to 28 February each year), the more your medical scheme fees tax credit will be," he says. Medical scheme holders with two dependents for 12 months could claim as much as R7 200.
Radebe further explains that taxpayers could claim for "out of pocket" medical expenses. This applies to the portion of medical expenses not covered by their schemes.
Taho clarifies that the medical scheme fees tax credit is a deduction to tax payable, as opposed to taxable income, which is the amount on which the tax liability is calculated.
She addsd that if one of the children on the medical scheme is disabled, the credit will be greater than for an able-bodied child.
2. Retirement annuity
Radebe explains that if you make contributions towards a pension, provident fund or retirement annuity, you can also claim deductions on taxable income.
"As long as you are making contributions to the fund, then you are entitled to the deduction under Section 11F of the Income Tax Act.
"However, once you withdraw from the fund and no contributions are payable thereon, then there will be no deduction for the retirement fund contributions," Taho says.
Deductions, however, are limited. If contributions made exceed certain limits, then the claims are carried forward to the subsequent year of assessment, explains Taho. These limits are either R350 000, or 27.5% of the person’s remuneration for the year, or 27.5% of the person’s taxable income before this deduction or a donations deduction, or a person’s taxable income before this deduction and a taxable capital gain inclusion.
The contributions will then be tested against the limits of that particular year, she added.
3. Donations
If you feel charitable and donate to a public benefit organisation, in terms of the Income Tax Act you can also claim deductions against taxable income. However, the deduction is limited to 10% of such taxable income before claiming the donations deduction, says Hadebe.
This means if your income us R900 000, then the deduction you claim for the donation made is limited to R90 000.
"To be able to claim this deduction, one must furnish SARS with a Section 18A certificate from the public benefit organisation to which the donation was made during the year of assessment," he explains.
4. Tax-free investments
"When a person has invested in a tax-free investment, interest income earned thereon is fully exempt from tax, as opposed to other investments where interest income is partially exempt - up to R23 800 exemption for persons below the age of 65, and up to R34 500 exemption for persons who are 65 years old or more than 65 years old,” said Taho.
"Upon withdrawal from, or cashing in of the tax-free investment, the amount received is also disregarded from capital gains tax,” she added.
Contributions to the tax-free investment during the year of assessment should not exceed R33 000, and lifetime contributions towards the tax-free investment should not, in aggregate, exceed R500 000.
If contributions exceed these amounts, then 40% of the excess will be added to the person’s tax liability in that year, she warns.
5. Foreign employment income exemption
Britz explains that individuals working overseas for a 183-day term could claim back tax deductions on income earned for the period they were outside the country. "If you are employed outside the country for more than 183 days a year, and over the period more than 60 days are consecutive… the income earned for those days outside the country is tax exempt," he explains.
6. Travel claim
If you use your vehicle for work purposes, and if you can prove to SARS that a portion of your travel expenses are for work purposes, then you can claim a deduction on it as well. Britz recommends that taxpayers keep a logbook to record the distances travelled and to get approval for this from your employer.
*UPDATE: A previous version of this article stated that an individual is tax exempt if they work for a period of 16 days outside of the country, this has been corrected to 60 days.
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