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.

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.