The Individual Tax Season is upon us, many of you might have seen us share a lot about this. In this blog, we will not get into any technicalities, but rather share the administration side of things (or so to say).
Why You Need To File For Your Returns
As many like to say when starting a business that it is important for you to identify your WHY, and so it is for us to know WHY is it important to file for your returns.
1️⃣ The first, most general reason is that you are being a good citizen. Remember that if you don’t file, you are committing an offence as per Tax Admin Act, which is punishable by law.
2️⃣ For financing purposes, you need to be up to date with your taxes. When you apply for a home loan or car finance for instance, they will check your tax compliance status (as they do credit checks), it becomes an issue if you are not compliant with the South African Revenue Services (SARS). It communicates a message that you are not a god citizen who pays their dues.
3️⃣ You might have heard some people saying it’s Refund Season (although that is not necessary 100% true), but if you don’t file and SARS actually owes you a refund then you won’t get it due to non compliance.
4️⃣ Regarding your Retirement Fund – if you retire and your taxes are not up to date, it will be an issue for your funds to be released.
Those are some of the reasons why you need to be tax complaint. If you want this a bit more detailed, we did share a blog previously. Check it out here: https://accasesolutions.co.za/2021/03/29/important-things-to-know-about-tax-in-south-africa/
Where To File For Returns
Just to mention, you have various opinions available to you, you are not bound to use a tax practitioner (for example) because it does come at a fee. Here are some of the options available to you:
1️⃣ You can use your SARS e-filing.
2️⃣ You can use your SARS Mobi App.
3️⃣ You can make an appointment (via SMS or online) with your nearest SARS branch.
4️⃣ Or you can use a certified tax practitioner: we have pointers on this on our blog previously.
Mistakes: Criminal Offences
In passing, we would like to share these few red flags/little things that gets you in trouble with SARS and are actually criminal offences:
➡️ Not updating your details (emails address, banking details, postal address, etc)
➡️ Not filing for your taxes
➡️ Failure to provide information as and when requested to do so by SARS
… and a few more as listed below:
Moving right along… let’s touch on Auto Assessments.
How it works:
Previously, you would get a certificate from your third party (medical aid, employer, etc), log in and slot in the details manually. But now, SARS is connected to these 3rd parties and sources/uses information from them to pre-populate your returns. When your employer sends you IRP5, it gets loaded. When your medical aid gives you your certificate, it gets loaded. Everything you get from different institutions automatically get loaded into the SARS portal and when you login, you will find all this information in one place.
So before you ACCEPT the auto assessment option, it is your duty to ENSURE that all the details are correct if you are doing it by yourself. If you find that something doesn’t make sense, you can decline the Auto Assessment and “Edit” it. Although you might find that having a tax practitioner makes things a lot easier because we know better and understand some of the technical things you might not understand.
Home (Office) Expenses Deduction
If you follow us on social media, you might have seen us touch on this. So this is relatively new to most taxpayers due to Covid19 and working from home conditions (it has always been available to commission earners), but be in the know that you are able to deduct your home office expenses IF you meet the requirements. Some of the requirements include but not limited to:
✅ Your home office is used SOLELY for production of income.
✅ If the employee’s remuneration is only salary, the duties are mainly performed in this part of the home. It therefore means you perform more than 50% of your duties in your home office.
✅ Where more than 50% of your remuneration consist of commission or variable payments based on your work performance and more than 50% of those duties are performed outside of an office provided by your employer.
NB: Only expenses relating to the premises must be allocated based on floor area (such as rent, interest on bond, cleaning, etc.). Expenses that do not relate to the premises (such as clothing and furniture) do not need to be allocated based on floor area.
If you qualify for a home office deduction; enter the expenses amount calculated next to the source code 4028 (Home Office Expenses) in the “Other Deduction” container on your Income Tax Return.
Medical Aid Rebates (Tax Credit)
How rebates work;
SARS will show you how much tax you’re supposed to pay for the year, and we consider the rebates which reduce your tax liability.
For example; if you’re supposed to pay SARS R20 000 for taxes, and your rebates add up to R10 000, this will mean that from the R20 000 you’re supposed to pay, your tax will go down by R10 000 and you will only owe SARS R10 000.
However, this is not “automatic”. The “refund” comes in when you did not owe SARS anything (sitting at R0), and the medical aid credits come in (as per example)…leaving SARS in a position of owing you money due to the rebates.
Note that these are not refundable credits in a sense that if you did not pay tax for the year but you have a medical aid, you will not automatically get a refund from the rebates. The rebates DECREASE your tax liability. So if you did not pay tax for the year, you are not going to benefit from the medical aid credit.
We hope that this blog enlightened you and answered some of your questions. Feel free to send us a DM on our socials if you need clarity, or drop a comment below.