Sunday 3 December 2023

Unless you are not trying to evade tax, prepping to file returns should be easy

By Business Unusual Writer 

As the tax season is upon us there is an obvious need for taxpayers to prepare and fulfill the yearly constitutional obligation towards the South African Revenue Services (SARS). However, filing for tax returns is a source of anxiety because for some taxpayers the process seems complex, there is too much paperwork, there is uncertainty about whether to file or not, they skipped previous tax years, or they are panicked by others. 

To minimise confusion and complexity taxpayers ought to be aware that personal tax is different from other taxes such as Capital Gains Tax triggered when a property or financial asset is sold, or the 28% Corporate Tax paid by businesses when they are profitable. 

As long as taxpayers are not trying to evade tax there is nothing to worry about when filing tax returns. At its elementary level, personal tax filing is the process of informing the tax authority about your income, expenses, and other tax information. From this process, the tax authority can either find a taxpayer liable for a certain tax amount or may refund the taxpayer because they paid more tax. When filing there are typically three categories of information that need to be submitted viz: gross income, tax deductions, and tax credits information. To avoid penalties this information should be submitted to SARS before the tax season ends on 24 October 2022.  

Taxpayers must list all sources of income to determine the appropriate tax liability. Income sources include but are not limited to income received from employment, business income, investing, royalties, commissions for periodic work, or rental income. Whilst SARS exempts R 23, 800.00 of income earned from investing in SA Investment and taxes the balance, income earned from dividends is exempt. This is because the dividend-paying entity withholds 20% of the Dividends Tax and pays it directly to the tax authority.   

Technically taxpayers are supposed to pay 18% within the income bracket number one. However, every year SARS also sets the minimum taxable income within this bracket. For the 2022 tax period, only taxpayers that earn R 87 300.00 and above are liable to pay tax. 

On the other end of the spectrum, taxpayers in bracket seven, are liable to pay a minimum income tax of R 587,593. This tax liability is equivalent to the maximum tax that could be paid by income earners in bracket six. If the taxpayer earns more than R 1 656,601 then 45% will be charged on the additional amount and then added to the R 587, 593 minimum tax of this income bracket. This method is used to calculate tax liability for other income brackets except for tax bracket 1. 

Usually, an employer withholds your tax on the bases of your taxable income and pays it over to the tax authority monthly. Even under these circumstances, taxpayers are required to file because they won’t be taxed again on a salary already taxed. This is because taxpayers need to confirm that they do not have other sources of income. Aside from this confirmation they also need to provide tax deductions information.  

A tax deduction is an expense or item that can be subtracted from taxable income. In South Africa, allowable personal deductions include charitable contributions to public benefit organisations, medical expenses, income insurance policy, and contributions to retirement funds. 

Finally, certain limited expenses could be deducted by the employee from their employment income.  To this extent, employees who incur costs such as travel, automobile, entertainment, etc could deduct them from their taxable income to reduce the tax liability.   


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