Tax Returns - What You Need to Know
/By: Esmerelda Doman
We did a presentation on tax returns for employees who are uncertain how to navigate the new changes at SARS. We have added comments in italics below each section to give you a bit more information, the more you understand, the easier this will all be!
What is Basic Income Tax?
Income tax is the normal tax which is paid on your taxable income.
Examples of amounts from which the taxable income is determined:
▪ Remuneration such as:
salaries
wages
bonuses
overtime pay
taxable (fringe) benefits
allowances
certain lump sum benefits
What is Personal Income Tax?
Profits or losses from a business or trade
Income or profits arising from an individual being a beneficiary of a trust
Director’s fees
Investment income, such as interest and foreign dividends
Rental income or losses
Income from royalties
Annuities
Pension income
Certain capital gains
If you are in the lucky position, as far as tax is concerned, of receiving a salary and having tax deducted by your employer (Pay as You Earn), you probably don’t need to complete a tax return as your tax affairs are very straightforward and your total yearly income is below R500 000. As soon as you add additional sources of income, or want to claim legitimate deductions, you will need to complete a return to ensure that you pay the correct amount of tax, taking into account your financial situation.
Examples of deduction that can affect the Personal Income Tax Calculation:
Retirement Annuity
Medical Expenses
Travel Allowances
Who Must Submit Tax?
For the 2020 year of assessment (1 March 2019 - 29 February 2020), you are liable to submit an income tax return if you earn more than:
R79 000 if you are younger than 65 years
R122 300 if you are 65 years of age or older
R136 750 if you are 75 years of age or older
If you are confident that your employer is making the correct PAYE payments on your behalf, then you don’t need to submit a return, despite the above. However – the only way to be sure that your tax affairs are in order is the submit a tax return and see what information SARS holds on you! It’s a classic “Catch-22”, sadly not that uncommon when dealing with tax authorities. Our advice – file a return.
What Do You Need to Complete a Tax teturn?
Login details E-Filing
IRP5▪ Tax certificated from 3rd parties i.e IT3’s
Travel logbook
Retirement annuity certificate
Medical aid certificate
Donations certificate
Support for any other income you received
How Do You Complete a Tax Return?
This can be done on e filing ( you can register online).
At a SARS branch with an appointment. The SARS website can tell you what you will need to take with you.
What if you’re not registered on e-Filing?
You can follow the easy steps on SARS website.
What are the Deadlines for the Year Ending February 2020?
1 September to 16 November 2020: Taxpayers who file online
1 September to 22 October 2020: Taxpayers who cannot file electronicallycan do so at a SARS branch by appointment
1 September 2020 to 29 January 2021: Provisional taxpayers who file electronically
What are Autoassesments?
This year SARS did auto assessments and you can either accept this assessment or amend your return
SARS only include all information submitted to them from 3rd parties
You still need to include logbook details, rental income or additional medical expenses
Auto assessments are SARS understanding of your tax affairs. You should check these very carefully and decline the assessment if any information is not correct. It may even be worth declining the assessment just to ensure that your contact details on e-filing are correct, otherwise you may not receive important notifications.
Auto assessment is based on submissions from third parties to SARS – employers, banks, retirement annuities etc. It is possible for this information to be wrong, and again, we encourage you to decline to accept until you have gone through the assessment and checked it. One of the problems with the auto assessment is that it doesn’t show any of the source information, only the final result. That makes it very difficult to know what is correct and what isn’t.
You should also be aware that if you know that additional information has to be submitted, income from investments for example, it is an offence to accept the assessment knowing it to be incorrect.
This might include any interest you have earned from money SARS themselves hold on your behalf (from an overpayment for instance) on which they will have paid you interest. This amount should be detailed in a Tax Certificate sent to you by SARS, but probably not included in their calculations…
Additional thoughts and observations
If you receive a tax demand from SARS which you believe to be wrong you can contact them to get it corrected. But, and it’s a big but, they will often refuse to enter into any discussions or appeals until the outstanding tax they have calculated is paid.
For instance, if SARS claim you owe the R1,000,000 and you know you don’t, they will still insist on receiving payment before they will enter into discussion to determine the correct amount due to them. This is why it is so important to get your returns correct.
If you do more than one job, for instance you are employed part time and your taxes are paid via the PAYE system, but you also do freelance work for other clients for which you are paid a gross fee, you should definitely submit a return to ensure that not only are you charged the correct amount of tax overall, but that you get the full benefit of any business deductions you may be entitled to. If you are unsure or this appears too complicated, it is probably worth seeking advice from a qualified tax practitioner.
If you have accepted your auto-assessment and you are to receive a refund, do not spend this too quickly. Wait until you have received a final completion letter from SARS, or you are 100% sure your assessment is correct. SARS has the right to re-assess you if new information has come to light that changes your tax situation.
Annja is worried that taxpayers just click accept on their auto assessments and that in a few months realise just how incorrect it is and will need expensive professional assistance to resolve the matter.Our June newsletter contained some detailed information regarding submitting tax returns. You can read it here.
Things SARS may not know about
Travel allowances
Additional medical aid expenses
Donation made
Whether you have a disabled dependent
Foreign income
Investment income
Investment income
Since these are all relevant to your tax figures, it is up to you to provide the information, it’s not up to SARS to find it out for you.
