What Is Taxable Income?

Income tax is levied on all income and profit that is received by the business owner, companies and organisations. This tax type is also the national government’s main source of income and is set by the Income Tax Act No. 58 of 1962. A number of taxes also fall within the income tax category, including SITE, PAYE and Provisional Tax. To give you more of an understanding of how income tax works and how registration is done, PATC  offers some helpful guidelines on one of the most common types of business tax services performed by accountants, including the following:

  • Income tax assessment is done over a period of 12 months – for individuals and trusts, this is done from 1 March until 28/29 February of the following year. For companies, the assessment period is the relevant financial year.
  • The Tax Season for returns starts on 1 July every year, and deadlines for the submission of returns vary according to the type of tax payer – non-provisional taxpayers must submit by the last working day of September if submitting via post, or the last working day of November is done electronically; provisional taxpayers have until 31 January and companies must submit within 12 months after the financial year end.
  • All individuals and business receiving income need to register for income tax by law, but only those who have remuneration over R120 000 and/or have business of more than one income need to submit an income tax return. If you receive less than this amount but from more than one employer, then you will need to submit a tax return.

While the process has become far more simple thanks to eFiling, accounting companies make your life simpler by handling all aspects of income tax on your behalf. Contact PATC today to learn more about income tax and other business tax services that we offer.

What Are Income Tax Deductions?

Business tax services are about so much more than simply registering for income tax, these services also cover aspects such as income tax returns. To be able to complete your tax returns efficiently and correctly, you will first need to have a clear understanding on tax deductions to ensure that you do not either claim for items that will not be deducted, or not claim for items that can be deducted.

The main expenses that can be deducted from your income tax returns include items for business purposes such as:

  • Rent
  • Business Travel Expenses
  • Payroll
  • Insurance
  • Taxes
  • Interest

Income tax deductions can also be done for capital expenses such as the following:

  • Equipment Purchases
  • Property Purchases
  • Repairs to Equipment or Property
  • Depreciation of Equipment

Home offices that are just starting up can also be deducted. This is done by calculating the portion of space in your home that is used for work purposes. Business travel expenses can also be deducted if the trip was entirely devoted to business. Vehicle mileage for business related car travel can also be deducted by calculating the amount mileage used for business needs.

To ensure that your income tax returns are completed on time and that they are correct in terms of deductions, it is always best to consider a professional accounting firm to assist with your tax needs. Contact PATC today to learn more about business tax services on offer.

SARS eFiling: Should I eFile my Tax Return?

A brief story of why you should not file a tax return the old off-line way

Well to be frank – SARS are forcing your hand. The only way to avoid eFiling now is to go to SARS or one of their “pilot” offices. This entails biting, kicking and fighting for a parking, then waiting in their queue – between 20 minutes and three hours – depending on when you go there. Then sitting with a “very enthusiastic” SARS employee who does everything for you – on their eFiling system. You might as well have done it yourself.

So in a nut-shell yes eFile. It is fast, efficient and far more convenient than waiting at a SARS office.

Go to the SARS website – www.sars.gov.za click on eFiling at the top and get yourself registered. It is a bit scary navigating through it – but once it is all done and set-up it really does beat going to the SARS offices every time.

But, if you don’t have the time, patience or energy, simply bring it to us and we’ll do everything for you. We are registered tax practitioners with SARS eFiling and so it is much easier for us to do it all for you. You don’t cut your own hair – so why do your own taxes? Contact us today.

What is SARS eFiling?

eFiling is a simple and secure online process for the submission of returns and declarations and other related services. This service allows taxpayers, tax practitioners and businesses to register and submit returns and declarations make payments in respect of taxes, duties, levies and contributions and perform a number of other interactions with SARS in a secure online environment. The simplicity of the process results in fewer errors and creates a quicker processing cycle for individuals and businesses. eFiling is paperless and submissions are instant and reliable.

How to eFile

Firstly you have to register as an eFiling user before you can file your returns or make payment through eFiling or to access your own tax information.

To register as an eFiler you will need:

  • Your tax number
  • Company registration number (if applicable)
  • ID number
  • Bank account details
  • Your personal details including your date of birth.

SARS eFiling Deadlines:

eFilers are given more time to make submissions and payment compared to manual tax submissions. Please check the key dates on http://www.sarsefiling.co.za Efiling sends an electronic confirmation via email, advising that the returns for the specified tax type and company/individual has been issued, and also sends a SMS or email notification to remind eFilers when submissions are due. No more waiting in queues or worrying about office hours. Once registered, eFilers can submit their returns and view their tax status and make payments to SARS electronically 24 hours a day. If you need assistance with your eFiling, please contact us to ensure your tax is submitted correctly and on time

Dividends Tax

Dividends tax is a withholding tax that came into effect on the 01st of April 2012 and replaces Secondary Tax on Companies (STC). Dividends tax is levied on the beneficial owner at 15 per cent. The beneficial owner need not be a registered owner of the share. A registered owner could be for an example an agent or a nominee holding the share on behalf of the beneficial owner. Section 1 of the Income Tax makes it clear that as from the 1st of April 2012 the dividend does not have to be paid to a shareholder; it merely has to be paid in respect of a share in the company.

Difference between Dividends Tax and Secondary Tax on Companies (STC)

Dividends tax is the tax imposed on the beneficial owner, exempts residents companies and levied at 15 per cent whereas STC was imposed on the company paying dividends and was levied at 10 per cent, this tax is aimed at encouraging companies and close corporation to retain profits instead of declaring dividends because if the company declares more dividend they will be liable for more tax. The introduction of Dividends tax gives relief to the companies as the tax on it is borne by the beneficial owner.

Organise your FREE first consult with us.

What Is Donation’s Tax?

When a taxpayer disposes of property by way of a donation, a donations tax will be levied on the value of property disposed. This donations tax is levied at a rate of 20% on the value of the property donated and payable to the Commissioner within three months or a period that the SARS Commissioner may allow from the date upon which the donation in question takes effect.

If any property has been disposed of for a consideration that, in the opinion of the Commissioner, is not an adequate consideration, that property is treated as having been disposed of by donation. The donor is liable for the payment of the donations tax. If the donor fails to pay the tax within the prescribed period, the donor and the donee are jointly and severally liable for the tax.

Certain transactions are deemed to be donations, even though the transaction was not concluded as a donation. An example is when a taxpayer disposes of property for a consideration that, in the opinion of the Commissioner, is not an adequate consideration, that property will be deemed as having been disposed of by way of a donation.

Not all donations made by a taxpayer will be subjected to Donations Tax. Donations by a public company are exempt and donations between spouses are also exempt. Donations by individuals, up to R100, 000 are exempt and for juristic persons the exemption is limited to R10, 000 in respect of casual gifts. Donations to public benefit organisations are also exempt from tax up to a maximum of 10% of the donor’s taxable income, provided it can be supported by a receipt or certificate from the P.B.O. in a manner as prescribed by the Income Tax Act.

Medical Tax Credits

Medical tax credits came into effect on the 1st of March 2012 and replace the medical scheme contribution deduction. This was introduced to achieve great equality in the treatment of medical expenses across income groups in taxpayers below the age of 65. The difference is that the medical tax credit will not be allowed as a deduction for personal income tax purpose but as a credit.

The medical tax credit is available to taxpayers who belong to a medical scheme and are below the age of 65 set at fixed amounts per month

  • R216 each month for the contributions in respect of the employee and one dependant whereas the old medical scheme contribution deduction allowed a deduction of R720 per month, plus
  • R144 per month in respect of each additional dependant.

Medical Tax Credits are claimed every month when a salary is paid because it is a tax credit and it decreases the tax liability. For an example Miss Nyoka earns a salary of R16 040 per month, makes the two contributions R800 pension and R1 000 medical aid scheme per month and has no dependants.

Here is the tax calculation example applying medical tax credits:-

  • Salary R16 040.00
  • Deductions:
  • Pension (R800.00)
  • Taxable Income R15 240.00
  • Tax payable per month R1 923.33
  • Less Medical Tax Credits (R216.00)
  • Final Tax payable R1 707.33

Example applying medical contribution deduction:

  • Salary R16 040.00
  • Deductions:
  • Pension R(800.00)
  • Medical Aid Contribution (R720.00)
  • Taxable Income R14 520.00
  • Tax payable per month R1 743.33
  • This becomes the final tax payable because medical aid contributions were allowed as a deduction whereas in the new medical tax credit is it treated as a tax credit.

If you would like assistance with the new medical tax credits, contact PATC today.

Taxpayers Married in Community of Property

One of the many reasons that people may need an accountant is to assist with ante nuptial contracts and community of property negotiations. The ‘half is yours, half is mine’ form of marriage is a popular approach to nuptials; however both parties should always ensure that they understand the advantages and disadvantages of choosing this marriage regime.

If an ante nuptial contract is not signed before the marriage, the marriage will automatically be in community of property. Once you are married, you will have only one joint estate. This means that all of your mutual assets will be thrown into one pool, with nothing outside this pool. This is one way of obtaining assets (or debts) without working for them.

Even though you may have your own bank accounts in your own names, there is no such thing as lending money to one another and giving it back. Everything your partner earns is yours and vice versa. All loans are in both of your names, and couples married in community manage the joint estate together. Therefore, taxpayers who are married in community of property are taxed on half of their own interest, dividend, rental income and capital gain, and half of their spouse’s interest, dividend, rental income and capital gain, regardless of in whose name the asset is registered (except for assets excluded from the joint estate). All other taxable income is taxed only in the hands of the spouse who receives that income.

Professional Accountants are able to assist with all of your community of property questions and requirements, helping you manage your tax requirements effectively.

How to Make the Most of Your Travel Claim

One of the many business tax services offered by PATC (Professional Accountants and Tax Consultants) is assistance with travel claims. Travel allowances and the claiming of travel deductions under the present tax system will ultimately be phased out. Every year we see SARS shutting the door a little tighter on the popular benefit. If you play your cards right, you can still use the allowance to your tax advantage.

Travel Claim Tips

Consider the following business tax services tips to help you make the most of your travel claims:

    1. The logbook is the key to maximising the tax benefits of your travel allowance. This book distinguishes between business and private travel on a daily basis, and includes mileages to and from various destinations. Bear in mind as of 1 March 2010, if you receive a travel allowance, a logbook has become compulsory for you.
    2. SARS deems the first 18000km to be private, therefore limiting your business mileage to 14000km. However, if you travel less for private reasons and more on business, an accurate logbook can save you thousands.
    3. Who benefits from a travel allowance?
      • Sole proprietors
      • Commission earners
      • Independent contractors
      • Employees who receive a travel allowance
      • Employees, Directors, members and others who use a company owned vehicle
    4. If you use your company car, you are only taxed on the private use of that vehicle. This portion is known as a fringe benefit. Tax on private use of a company car can be reduced:
      • Where you carry the cost of maintaining the car
      • Where your private travel is less than 10,000km
      • Where you carry the cost of running the car (fuel)
    5. You may claim wear and tear deductions on your personal car used for business purposes, but this only applies to commission earners, sole proprietors and independent contractors.
    6. Be aware that SARS conducts random audits on individuals to test the accuracy and truthfulness of the travel expenditure they have claimed.

Download the new SARS logbook from http://www.sars.gov.za/TaxTypes/PIT/Pages/Travel-e-log-book.aspx and further business tax services assistance in maximising your tax benefit, call our team today.

Business Mileage

Most of us use our personal vehicle for business purposes, it is therefore important to log the total distances travelled for all for business trips in order to claim back these expenses.

What can you claim?

The income tax system allows taxpayers who receive a travel allowance to claim a deduction for the use of their private vehicle for business purpose. Updating your logbook and recording your mileage and specifying each business trip will help you make an accurate claim when submitting your tax return.

How to claim

In order to claim a deduction you need to keep a record of all your vehicle’s odometer readings from the 1st March each year to the last day of February the following year .The opening and closing readings gives you the total kilometres travelled for the year. The actual amount travelled during a tax year and the distance travelled for business purposes substantiated by the log book are used to determine the costs which may be claimed against a travelling allowance.

Eighty Percent of the travel allowance paid to an employee is subject to a deduction of the employee’s tax. This 80% of the travel allowance must be included in the employee’s remuneration for the purpose of calculating Pay As You Earn (PAYE). The percentage is reduced to 20% if the employer is satisfied that at least 80% of the use of the vehicle for the year will be for business purpose. The full travel allowance must be disclosed on the employee’s tax certificate.

Contact PATC for any advice you may need with regards to business mileage or other claims.