May 2022 | General Interest, Tax
“Taxpayer: One who doesn’t have to pass a civil service exam to work for the government” (Anonymous)
“Tax Freedom Day” is the first day of the year on which we South Africans (we’re talking about the “average” taxpayer here) have finally earned enough to pay off SARS and to start working for ourselves.
This year the predicted date was 12 May 2022. That’s three days later than last year, and a whole calendar month later than in 1994 when we first started recording this.
That’s a depressing trend, but it’s a worldwide one and we certainly aren’t the worst-off country – Belgians for example only get to celebrate on 6 August! Certainly food for thought for anyone thinking of emigrating. Have a look at Wikipedia here for some country-by-country comparisons.
Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.
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January 2022 | Economy, Tax
Finance Minister Enoch Godongwana has invited the public to share suggestions on the 2022 Budget he is expected to deliver on Wednesday 23 February 2022.
The Ministry of Finance: “As usual, the budget allocation always aims to strike a balance between competing national spending priorities … suggestions must pertain to what should government be spending on, how to address a large budget deficit, new sources of tax revenues, and other budget-relevant information … Minister Godongwana looks forward to your contributions.”
Go to National Treasury’s “Budget Tips for the Minister of Finance” page and fill out the online form.
Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.
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September 2021 | Personal Finance, Tax
“The future of money is digital currency” (Bill Gates)
If you are thinking of buying – or have bought – any “crypto asset” such as a cryptocurrency like Bitcoin, Ethereum, Polkadot, Solana (or any of the many other crypto currencies springing up all over the place), be aware of the tax implications.
As a start, read the new SARS webpage “Crypto Assets and Tax” here, first published on 27 August 2021 and providing guidance on (at date of writing – expect this webpage to evolve!) these questions –
- What is it?
- How did we get here?
- Do I need to pay tax on crypto assets?
- How will it work? (With an example of the ITR12 Income Tax Return for the 2020/21 tax year)
- How is SARS tracing crypto asset transactions?
There are still grey areas here – and many pitfalls – so be sure to take specific professional advice!
Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.
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February 2020 | Economy, Property, Tax
“To support the property market, the threshold for transfer duties is adjusted” (Finance Minister Tito Mboweni)
Transfer Duty Exemption Up
Some good news for property sellers and buyers in particular is the increase in the transfer duty exemption to R1m. See the table below for details and note that with all the brackets being adjusted upwards, buyers at every level will save – for example the buyer of a R2.5m house will save R17,000.
Some useful Tax Calculators for you
- How long will you work for the taxman today?
Input your salary into the 2020 Tax Clock calculator and find out how many hours you will spend today working for the taxman, and at what time precisely you will finally start working for yourself (warning – it’s not pretty!).
- How will your income tax change?
Put your monthly taxable income into Fin24’s Budget 2020 Income Tax Calculator to find out.
- How much extra will your sin taxes cost you this year?
Work out how much more you will be shelling out for spirits, wine, beer and cigarettes (or how much you will be saving if you don’t indulge!) with Fin24’s Budget 2020 Sin Tax Calculator.
Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.
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January 2020 | Property, Tax
“Few of us ever test our powers of deduction, except when filling out an income tax form” (Laurence J. Peter of The Peter Principle)
Letting out property can give you an excellent “annuity” income, and if that concept appeals to you and a buy-to-let property comes your way at the right price put an offer in right now; before the current ‘buyer’s market’ runs its course.
In your financial planning however remember the tax implications, because as a landlord you must add your rental income to your salary and other taxable income in your tax return every year. Not to do so is tax evasion, and that carries heavy financial penalties as well as the very real threat of criminal prosecution.
Having to pay tax on your rental income could be make-or-break when it comes to deciding on how much you should pay for a particular property, so do your homework before you put your offer in.
Our tax laws are complex and specialised, so professional advice on your particular circumstances is essential here. These general concepts will however help you in your initial planning –
You must declare all property rental income
You must declare your gross rental income to the taxman whatever type of accommodation you rent out – whether a whole house or apartment, just a room/garden flat or anything similar – or if you are in the guesthouse/B&B/Airbnb business.
You can claim some expenses, but not all
Your taxable income will be calculated by subtracting allowable deductions from your gross income.
In general, only “expenses incurred in the production of that rental income can be claimed” (SARS). So you can claim things like levies, rates and taxes, bond interest, advertising, agent’s fees, homeowner’s insurance, garden services, electricity and water, repairs and maintenance to the leased area (which would, says SARS, “usually take place when a person attempts to restore an asset to its original condition as a result of damage or deterioration”). Beware the “beginner’s mistake” of thinking that your full bond repayment instalments are deductible – not so, only the interest portion can be claimed and not the capital repayments.
In regard to VAT (per SARS): “The supply of accommodation in a dwelling is an exempt supply for VAT purposes, and consequently you may not deduct VAT incurred on expenses in respect of supplying accommodation in a dwelling.”
And when it comes to renting out only a portion of a property (a room say in the house you live in) you can only claim pro-rata to total floor area. Click here for a practical example from SARS.
Take advice also on claiming depreciation on furniture and the like – your allowable deduction there might be worthwhile.
Not allowed are “expenses that are capital in nature or that are not in the production of rental income” (SARS). So the cost of improvements to the property – which would normally “result in the creation of a better asset” (SARS) – cannot be claimed. Improvements can however be added to the “base cost” of your property – important when you come to pay CGT (Capital Gains Tax) on eventual disposal.
How are you taxed, and what about “ring-fencing”?
Your total taxable income (i.e. including net rental income) will be taxed as per current tax tables.
What if your letting business shows a loss? Per SARS – “should the expenses exceed the rental income, the loss should be available for set-off against other income earned by the individual, provided that the loss is not “ring-fenced” in terms of prevailing anti-avoidance provisions”. In other words SARS could ring-fence your letting business losses to stop you from setting them off against your regular non-rental income. But if that happens you don’t lose those losses, they are just carried forward so that when your letting business starts turning a profit the losses can then be set off against that profit.
Keep an eye also on your obligation to register for and pay provisional tax. As an individual if you earn taxable income of R30,000 p.a. or more in “rental from letting of fixed property” you fall into the net.
Keep full records from Day 1!
Create and maintain a full spreadsheet, with a file of supporting documents, of all income and expenditure (distinguish between revenue and capital, claimable and not claimable). It’s a relatively painless exercise if you update it regularly, but a real challenge if you end up trying to recreate everything only when the annual “income tax return panic” sets in, or when SARS and/or your accountants call for breakdowns and documentation.
Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.
© LawDotNews
May 2019 | General Interest, Tax
“Untold Wealth: That which does not appear on income tax returns” (Anonymous)
“Tax Freedom Day” is the first day of the year that we South Africans (as a whole) have earned enough to pay off the Tax Man and to finally start working for ourselves.
It arrived this year on 18 May. That’s five days later than in 2018, and a whole 37 days later than in 1994 when we first started measuring this – not a happy trend, nor unfortunately one likely to be reversed in future.
But it could be worse. Taxpayers in a lot of other countries are still working for government – Norwegians for example only celebrate on 29 July!
Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.
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