Having fun (not) with your tax return?
Tax. Such a dirty little word. Reminds one of other three-letter words, but this one is unavoidable. We can almost hear the child inside you whine, “But whyyyy?”
Because in the adult world, taxes are meant to be spent on important infrastructural services such as housing, postal services, healthcare, education, road maintenance, refuse removal, public protection, water and electricity, town planning and developments, etc. We are no tax experts, but in business paying tax is inevitable, so we thought we’d write a helpful reminder.
Provisional and non-provisional – who’s who again?
Tax payers are divided into two categories: salaried and provisional. “Salaried employees pay tax monthly and their tax returns are due in November. Only the usual deductions are allowed, e.g. medical aid, pension, RA and provident fund,” says tax expert Kobus Botha of Morning Tide Investments 274. “Provisional tax payers can also pay their tax monthly, but normally pay in August and January. Their salaries are more structured and are allowed more deductions, such as a travel allowance and depreciation.”
“Tax is an integral part of your financial planning,” says Botha. “There is an allowable maximum tax deduction benefit and your payment structure must be well-planned to get the most out of it. Supporting documents must be accurate and require technical skill, so get a professional to help you get more bang for your tax bucks.”
Tax planning quickie
1. Cash must change hands sooner or later (i.e. a retirement annuity will affect your cash flow). If you spent R1 000 on a retirement annuity and your marginal tax rate is 40%, you save R400 in tax. But you’ve still spent R1 000. If you decided not to spend that R1 000 on an RA, you would pay the R400 tax and have R600 to spend. An RA has the benefit of providing a return at retirement, but that is not the case for all tax deductible expenses. Buying a laptop might be tax-deductible and fun, but that money is gone! Your tax planning must meet your needs and gel with your cash flow. Don’t buy things to save on tax and then end up without food on the table.
2. When doing tax planning, consider your own position and that of your loved ones. Let’s say your child dreams of becoming a medical doctor. You now have a tax problem and invest heavily in an RA. That money will never be accessible to help the child through university. When assessing your tax situation, consider everything, not only the tax hurdle.
3. Tax is not fair. You’re educated, work hard, have responsibilities, take risks, deal with stress and when you make a profit, the government wants big chunks of it. After you’ve paid income tax and there is something left, there’s VAT. And on and on. But there’s also one shiny side of the coin: You may – legally – minimise your tax. It can get quite technical, so find a qualified and registered tax practitioner – it’s usually well worth the fee.
Urgent tax to-dos
Back to the reality of dealing with your filing system (it is organised, right?) and all the numbers of the past financial year.
Tips to lighten the load:
1. If you’re about to get a tax migraine, get an accountant or tax practitioner who is registered with a recognised controlling body, such as SARS, the Chartered Institute of Management Accountants (CIMA), the Chartered Secretaries Southern Africa (CSSA), the Independent Regulatory Board for Auditors (IRBA), the Institute of Accounting and Commerce (IAC), SA Institutes of Chartered Accountants (SAICA), Professional Accountants (SAIPA) and Tax Practitioners (SAIT).
2. If you are tech savvy and clear on your numbers, you can file your tax return yourself online. All you need to sign up is your ID number, tax registration number, proof of address, email address and the colour of your underwear.
3. If you don’t have a decent filing and invoicing system, get one. There are plenty of good programmes such as Pastel, Quickbooks, Freshbooks and Wave to use without breaking the bank.
4. Give your accountant what he/she asks for to lessen the stress for both of you.
Diarise these tax dates for 2016:
29 January 2016 — Provisional tax payers (eFiling)
5 February — PAYE submissions and payments
25 February — VAT manual submissions and payments
26 February — Excise duty payments
29 February — CIT provisional tax payments
29 February — VAT electronic submissions and payments
For the finer details: http://www.sars.gov.za/TaxTypes/PIT/Tax-Season/Pages/default.aspx
If you action all of the above, you’ll get through tax season with flying colours. Take a deep breath, smooth out the admin kinks and congratulate yourself with a glass of tax-deductible wine.