Fringe Benefits Made Easy

A fringe benefit is the cash equivalent of taxable benefits that are given to employees by their employer. Fringe benefits are taxable, and can be challenging to calculate without the help of an accountant or tax expert.

 Types of Fringe Benefits

Fringe benefits are calculated by professional accountants, and can be offered through a number of different ways. Some of the most common examples of fringe benefits include the following:

  • Employee use of company owned vehicle.
  • Medical aid contributions made by an employer.
  • Holiday accommodation provided to employees.
  • Long service and bravery awards.
  • Employee use of business cell phones and computers.
  • Low interest or interest-free loans.
  • Subsistence allowances.
  • Residential accommodation supplied by employer.

Tax on a fringe benefit is calculated by using a determined value of the benefit that is received. It is essential for employees to submit a tax return to ensure that the tax amounts that were paid are correctly calculated.

Need an accountant to assist with fringe benefits and other tax services? PATC provide a wide range of tax solutions to help you simplify your accounting processes and effectively manage all of your tax requirements.

What Is Donations Tax?

One of the many benefits that PATC offer taxpayers is assistance with donations tax. Donations tax is payable at a rate of 20% on the value of any property disposed of by a South African resident (natural person, corporate entity or trust), according to the following terms:

  • Excluding donations exempt from the tax (see exclusions below)
  • Provided that the tax is paid within three months of the donation taking effect.

 What do Exempt Donations Include?

PATC will be able to assist taxpayers in determining whether their donation is except from tax or not. The following should be considered in regards to exemptions:

  • Donations by natural persons up to R100, 000 per year.
  • Donations by corporate entities not considered to be public companies up to R10 000 per year
  • Donations between spouses not separated
  • Bona fide maintenance payments
  • Donations to Public Benefit Organisations and qualifying traditional councils and communities
  • Donations where the donee will not benefit until the death of the donor
  • Donations made by companies which are recognised as public companies for tax purposes
  • Donations cancelled within six months of the effective date
  • Property disposed of under and in pursuance of any trust
  • Donation of property or a right in property situated outside South Africa if acquired by the donor:
  • Before becoming resident in South Africa for the first time, or
  • By inheritance or donation from a non-resident
  • Donations between companies forming part of the same group of companies.

For further assistance on including donations in tax returns, contact us today

Capital Gains Tax on Land

When it comes to determining Capital Gains Tax on land that you plan to dispose, PATC will be able to assist you throughout every step of the process. Capital Gains Tax (CGT) is a tax that is given on any capital gain, when certain assets such as investments or property are sold, destroyed or disposed of in any way. While residences meeting certain criteria may not be excluded, other assets may not be included. These include the following:

  • A primary owner-occupied residence up to a maximum of R1 million, including up to two hectares of adjacent vacant land.
  • All private motor vehicles, as well as personal belongings and other items.
  • Retirement benefits, selected first hand policies such as long-term insurance plus endowments and retirement annuities.

While you will not be charged on the above mentioned two hectares of adjacent land, you will be taxed on the actual land that you plan to use for property development. To determine whether your land will be taxed, your professional accountant will be able to assist to find out whether your land is liable for CGT. Inclusions for CGT include investments such as shares and unit trusts, second hand policies, any profit resulting from the sale of property not used as a primary residence, coins, certain aircraft and boats, plus land.

To learn more about the Capital Gains Tax and other services offered by the leading accountant South Africa services company, contact PATC today.

Capital Gains Tax on Real Estate

For homeowners concerned about their liability of Capital Gains Tax (CGT), PATC offers professional accountant services to assist with all aspects of this real estate tax. Capital Gains Tax is payable on the sale of real estate in South Africa. This tax is therefore something that affects every South African who is planning to sell property. Liability for CGT varies depending on whether the property seller falls into one of the following groups:

  • They are a resident selling their primary residence
  • They are a resident selling property that is not their primary residence
  • They are a non-resident
  • They are a non-natural person such as a company, close corporation or trust

Your liability will differ according to the group that you fall under, with different percentages of CGT owned for each type of homeowner. CGT is only applied to the profit that is made on a property when it is sold, but is not applied to the entire value of the property. Assisting you in determining your liability is one of the first steps that PATC will take when assessing your CGT requirements. Other things to keep in mind regarding CGT include the following:

  • Residents are liable for the payment of Capital Gains Tax on the disposal of any asset, subject to certain limited exceptions, whether the property is a primary or non-primary residence.
  • Non-residents are only liable to pay CGT on the disposal of the following:
  • Immovable property situated within the country, including any right or interest in immovable property, plus an interest of at least 20% in a company where 80% or more of the net assets value of the company is attributable, directly or indirectly, to immovable property in South Africa.
  • Assets of a permanent establishment of a non-resident in the case of a sale that is conducted in South Africa.
  • For natural persons the maximum rate of CGT is 10%, while for non-natural persons such as companies and close corporations, the rate is 15% and for trusts 25%.
  • South African residents do not pay Capital Gains Tax on the first R1 million in profits made on the sale of their primary residence. Non-residents do not qualify for this exemption if their primary residence is not in South Africa.

To learn more about Capital Gains Tax and how it affects you directly as a homeowner, contact PATC to make an appointment with a helpful and knowledgeable accountant in South Africa.

Capital Gains Tax on Shares

The purpose that your shares serve will determine whether your shares will be charged for Income Tax or Capital Gains Tax, and your professional accountant is the best person to give advice on whether you are liable for CGT on your shares.

If your shares are intended as trading stock used to resell, any gain or loss on disposal will be of a revenue nature. Revenue gains are subject to income tax at your marginal tax rate, which may vary between 18% and 40% depending on your income tax level. If your shares act as a capital asset (i.e. A long-term investment) any gain or loss will be of a capital nature.

Information pertaining to CGT on shares includes the following:

  • Capital gains are subject to tax at a lower rate than ordinary income. For individuals, the first R15 000 of net capital gains or losses in a tax year is exempt for CGT – this is known as the annual exclusion.
  • Of this balance, 25% is included in your taxable income and taxed at your marginal tax rate, much like your salary or pension is taxed.
  • The Capital Gains Tax rate on an individual’s net capital gains in a tax year can therefore vary between 0% and 10%, depending on whether your shares exceed the annual exclusion or not.
  • Companies and trusts are liable for a higher CGT rate, and are not qualified for exclusion.
  • Companies and trusts must include 50% of their net capital gains in their taxable income, and also pay secondary tax (STC) on the profits they distribute.
  • The effective tax rate on net capital gains for a company is 29% x 50% = 14,5%. If the capital profit is distributed as a dividend, the effective company tax rate is increased to 22,27% (14,5% normal tax + 7,77% STC).

Contact PATC today to learn more about the Capital Gains Tax services and other accountant services on offer.

Capital Gains Tax on Trusts

When it comes to Capital Gains Tax (CGT), PATC are able to assist with all areas including taxation on investment assets such as trusts. Capital Gains Tax is applied differently to every asset, which means that what may apply for certain assets may not always apply to other assets. When it comes to trusts, you as the investor are liable to pay CGT on any profit that you make once you sell your trusts and make a profit on the sale. Unit trust management companies do not pay CGT on any trading that is done on the underlying investments. To ensure that you fully understand the way that CGT is applied, speak to your professional accountant to discuss your personal needs.

Specific points for investors to note when it comes to CGT and trusts include the following:

  • As a unit trust investor, you will only be liable for CGT if you sell your units in a unit trust.
  • Investors will only need to pay CGT costs once, when the units within your trust are sold.
  • You will not be liable for CGT when a portfolio manager restructures a unit trust portfolio by selling an underlying share or bond.
  • Each tax year, SARS gives you an exclusion of R10,000 on the sum of all your capital gains and losses, including trusts.

Contact PATC today to discuss all of your CGT concerns, and learn more about the wide range of accountant services on offer.

Retirement Annuities and Tax Savings

Investing in an RA provides a disciplined way of saving and RA’s are tax-deductible up to a certain maximum and can provide great tax savings. The end of the tax year is a good time to maximise the tax breaks SARS allows on retirement annuities (RAs) by topping up with additional contributions, perhaps that year-end bonus! If you have contributed less than the maximum tax-deductible amount to an RA, you can use any additional cash to top up your RA and enjoy the full tax benefit.

Each year, you’re allowed a minimum tax deduction of R1 750. Alternatively, you can contribute the greater of R3 500 less your allowable pension fund contribution; or 15% of your non-retirement funding income, to an RA tax-free. Any additional payments (over the 15% limit) can also be carried forward and offset against your future taxable income.

If you are self-employed, or your employer does not offer a pension or provident fund, your income is considered ‘non-retirement funding’. If you are a member of your employer’s pension/provident fund, your income is known as ‘retirement funding income’. Those who get an income is solely from non-retirement funding income can make the most of an RA especially when it comes to tax breaks at year end. If you don’t have an RA, consider starting one now to maximise these benefits.

Contact PATC for assistance and your FREE first consult.

Retirement Annuity Tax

One of the many services offered by PATC  is assistance with Retirement Annuity Tax. While planning for retirement is something that every South African should be considering, the shocking reality is that only nine in every 100 South Africans have made adequate provisions for retirement. When the time comes for you to retire, how well you plan for your future will directly affect how comfortable you will be able to live once you have retired.

Retirement Annuity Tax offers an effective long-term investment product. Many self-employed people use this as a retirement savings tool, while those employed at a company often use it to supplement their company pension or provident fund. The main benefits and criteria of Retirement Annuity (RA) include the following:

  • In the case of self-employed persons, the limit is 15% of taxable income. For employees, it is the greatest of the following: R1 750 or R3 500 less the tax deductible contributions to the employee’s company pension fund, or 15% of non-pensionable earned income.
  • Up to certain limits, your contributions for Retirement Annuity are tax deductible, meaning that the government sponsors RA to a certain degree.
  • If you invest up to the limits above, you will get the most benefit as the investment returns will be worthwhile. However many accountants in South Africa advise against contributing more than the tax deductible limit, as it would be more worthwhile to invest the overflow into a higher-performing and more flexible type of financial plan.
  • You are also permitted to deduct the disallowed portion of the current tax year’s contributions in future tax years.
  • You are also able to deduct up to R1 800 each year for contributions paid to reinstate a lapsed Retirement Annuity policy.
  • Contribution options include one-off lump sums called a single premium policy, or recurring contributions made at regular intervals.
  • A number of portfolios can be considered, including equities and unit trusts as well as foreign assets and a balanced portfolio.
  • You will only be able to access your Retirement Annuity at the age of 55, shortly before retirement.

Take control of your future today, and contact PATC to learn more about Retirement Annuity Tax services.

Tax Awareness

60 Seconds is not enough to cover the finer details of tax awareness. As a professional, it is good to educate clients and the general public on accounting & tax issues, not everyone gets the opportunity to master every field of business. It is important to use the resources and expertise around you.

A tax planner or tax specialist, financial planner or an accountant can help you save on your tax bill. You may not be taking full advantage of a contribution you could be making that will lower your tax. Once the tax year is over you lose out on contributions you could have saved money on. Take advantage of our free 1st consultation and take a step to saving money.

 Tax reminders:

  1. The ‘tax season’ commences on 01st July.
    • Individual’s returns- deadline is the last working day of November.
    • Provisional Taxpayers & Trust – deadline is 31 January.
    • Company or CC- deadline is 12 months after the financial year of that company or CC.
  2.   Some tax exemptions or deductions:
    • Pension & Retirement Fund contributions. Are your contributions working for you? Are you contributing the maximum that you are allowed to be tax deductible?
    • Medical Aid Expenses & Contributions. Don’t forget about disability medical & related expenses- these are tax deductible. (Provided they meet the definition).
    • Interest & dividend received
    • Fringe Benefits- these are non- cash amounts given to employees by employers. These non- cash amounts are taxed at a determined value. Make sure that your employer is taxing you correctly throughout the year. A separate tax rating is used here. Examples of some fringe benefits are:
      • Use of motor vehicle.
      • Employer’s medical aid contributions.

An Accountant or Tax Consultant / Specialist will recalculate your tax and check it against what you have paid during the year. This is how an overpayment or underpayment of tax for that year is calculated.

There are many more deductions that an individual/Company or Trust is entitled to, call us and we can help you benefit.

Tax Allowances and How They Work

Business tax services includes a number of areas that business owners need to consider, including tax allowances for employees, and exactly how these allowances work. Employers are obligated to pay certain allowances for employees, particularly in the case of travel, vehicle and other taxable allowances according to the Income Tax Act No. 58 of 1962, Skills Development Levies Act No. 9 of 1999 and Unemployment Insurance Contributions Act No.4 of 2002 legislation – failure to cover these allowances is therefore grounds for employees to take businesses to the labour courts. Make sure that all of your employees are covered with business tax services assistance.

According to SARS (South African Revenue Services), tax allowances for employees are broken down as follows:

  • A subsistence allowance is any allowance given to an employee or a holder of any office for expenses incurred or to be incurred in respect of personal subsistence and incidental costs.
  • Compensation or an allowance paid to employees who reside far away from their normal place of employment or spend the night away from home is not regarded as a subsistence allowance and is subject to employees’ tax. This also applies in the case of a labour broker.
  • Section 8(1)(c) prescribes that the employee shall be deemed to have actually expended a certain amount (daily expenses in respect of meals and / or incidentals costs) where the employee is absent from his / her usual place of residence.
  • Where the accommodation to which the allowance or advance relates is outside South Africa, an amount equal to prescribed amount applicable to the relevant country is deemed to be expended for each day or part of a day in the period during which the employee is absent from his / her usual place of residence.

Additional reimbursable allowance for petrol can also be claimed, which is charged at a current fixed rate of R3.05 per kilometre, as set by the Minister of Finance. PAYE can be deducted by up to 80% if a fixed allowance is paid, but not if allowance has been reimbursed by the employer. PATC offers a number of business tax services that help you to correctly work out all tax allowances for your employees – contact us today for more information.