By Yolandi Esterhuizen, Compliance Manager, Sage Africa & Middle East
Non-provisional taxpayers who use SARS eFiling have only until 4 December to submit their personal tax returns. Here are a few things you should avoid when completing your return:
Mistake 1: Not declaring travel expenses in order to claim a tax deduction
A travel allowance is paid to an employee if they travel for business purposes. This is usually paid on a monthly basis, irrespective of the kilometres travelled. Your employer is required to withhold PAYE (pay as you earn) either from 20% or 80% of the amount based on how often you need to travel. On assessment, the entire amount will be subject to tax, unless you have kept a logbook and complete the necessary details.
If your employer reimburses you for each kilometre travelled, it is not required to withhold PAYE unless the amount the employer pays you exceeds the prescribed rate per kilometre. In this instance, your employer should withhold PAYE only from the amount that exceeds the prescribed rate per kilometre (R3.61 for 2018/2019). You must provide sufficient information to SARS for the deduction to be allowed.
How to claim the tax deduction:
Select “Y” on the question “Do you want to claim a deduction against a travel allowance?”. Once this field is activated, you need to indicate the number of cars you used. You will then complete details such as the car model, car make, cost price or cash value, registration number, the kilometres travelled and whether a logbook was kept. If this section is not completed, the travel allowance and/or reimbursement (if it exceeded the prescribe rate) which you received for the year will be included in taxable income and be taxed.
Mistake 2: Not declaring medical dependants
If a part or all of your medical aid contribution is administered through the payroll, your employer must consider the monthly medical tax credits before your tax is calculated for the month. For the 2018/2019 tax year the medical tax credits were
· R310 for the main member,
· R310 for the first dependant and
· R209 for every additional dependant.
If the medical aid contribution is not administered through the payroll, you may provide your employer with proof that you are contributing towards a medical aid in your private capacity. Your employer can then grant the benefit of the monthly medical tax credit. You must indicate the number of medical dependants you paid for per month in the annual tax return.
Even if the employer applied the medical tax credits on the payroll on a monthly basis, SARS will disregard the medical tax credits if the dependants are not indicated on the return. You will then owe SARS money. You must also declare your total medical expenses to claim additional qualifying medical expenses.
How to claim the medical tax credit and additional qualifying medical expenses
Select “Y” on the following question after which you need to enter the number of dependants.
If you are not the principal member of the medical aid but you have paid medical contributions/expenses for family members who are dependent on you for family care and support, select “Y” on the following question after which you need to enter the number of dependants:
Mistake 3: Not claiming an exemption for remuneration earned abroad
Did you perform duties outside of South Africa on behalf of your employer for more than 183 days of the year, of which at least 60 days were continuous? If so, the remuneration you earned for the work in the foreign country is not subject to income tax in South Africa. Your employer might have applied the exemption in South Africa, or it may still have withheld PAYE from your remuneration.
Irrespective of whether you are entitled to the exemption or not, the salary earned in the foreign country must be reflected against IRP5 code 3651 and not 3652. This is specified in the SARS Business Requirement Specification for PAYE and the SARS Interpretation note 16. Other remuneration earned abroad must also be reflected against the correct IRP5 codes on the employee’s tax certificate.
The remuneration reflected on IRP5 code 3651 (and other relevant remuneration earned abroad) will not automatically be exempt from income tax. You must indicate that remuneration was earned for services rendered in a foreign country. If all requirements are met, the exemption will be granted.
How to claim the exemption
Select “Y” on the question ‘Did you receive any form of remuneration for foreign services rendered?’ and complete the relevant section in which case the exemption might be granted.
Mistake 4: Not making use of a reputable tax practitioner
You, as the taxpayer, are responsible for declaring the correct information to SARS and will face the consequences if you don’t. Ensure that your tax practitioner declares all income by providing all the correct information to him or her. You may have heard of friends getting a refund from SARS – don’t necessarily imagine that this is because they have a better tax practitioner than you.
Each person’s circumstances and income differs, so some people might receive refunds and others not. A reputable tax practitioner will complete everything accurately based on the information you provided in order to only reflect a refund if it is allowed by law.
Now that your 2019 return is done, get ready for 2020
The next big milestone for individual taxpayers is the start of the new tax year on 1 March, 2020. Consider putting more money into retirement funding to reduce your taxable income for the next year. Also remember to check your car’s odometer reading at the end of February to update your logbook.