Completing your individual tax return can be cumbersome and overwhelming, especially if you are uninformed about the basics. “The important part of completing a tax return is to know exactly what you are allowed to claim as a deduction and then to understand how you should claim that deduction,” says Yolandi Esterhuizen, Legislation Manager at Sage VIP.
Esterhuizen provides the following information as key to remember when completing your individual tax return:
Tax return logistics
The filing season commenced on 1 July 2013 and the deadline for manual submissions is 27 September 2013 and for electronic submissions 22 November 2013. Provisional taxpayers
submitting electronically should submit on or before 31 January 2014.
For which period is the tax return? Income earned between 1 March 2012 and 28 February 2013.
Who should submit? No tax return needs to be submitted if the remuneration was earned from one employer and it did not exceed R250 000. However, if you earned any other form of income or you need to claim deductions such as travel expenses, a return must be completed.
You can complete the questionnaire on the SARS website at: www.sars.gov.za. This will help you to determine if you need to submit a return.
Where do I start? With eFiling, you can easily complete it yourself. Guides are available on the SARS website to assist taxpayers with the process. Alternatively you can contact a registered tax consultant.
Submit your return on time: To avoid any penalties or imprisonment, make sure to submit on time. Do not wait until the last submission day. Penalties will be charged if you do not submit on time. These amounts are calculated on a sliding scale, depending on the taxpayer’s taxable income. The penalties can range between R250 and R16 000.
Income Replacement Policy
An Income Replacement Policy is a policy that covers the individual against loss of income as a result of illness, injury, disability or unemployment. If you have an Income Replacement Policy, you need to claim your contributions as a deduction on your ITR12 return.
More about the process: On your IRP5 there will be an amount next to the code 4018 – Premiums for Loss of Income. Enter this amount on your return, under the deduction section. Even though this amount is reflected on your IRP5, it will not automatically be reflected on your ITR12. If you do not manually enter it, you will not receive the tax benefit and it might seem as if you owe SARS money if you have received the benefit on the payroll during the year.
If the contribution amount is not reflected on your IRP5 and you contributed towards an income replacement policy in your private capacity, follow the same procedure.
Step 1: Make sure to tick the field next to: ‘Did you make any retirement annuity fund contributions?’
Step 2: Enter the contribution amount next to code 4018 under the Retirement and Income Protection section.
Business travel expenses and your travel allowance
If you received a travel allowance from your employer, you have to have a logbook to be able to claim any travel expenses you incurred for business purposes. If no logbook was kept of the kilometres travelled, the travel allowance will be fully taxed. The portion of the allowance which was expended for private purposes will be taxed and the portion expended for business purposes will be exempt from tax. Initially the full amount will be taxed, but once you claim the business expenditure as a deduction, it will reduce the taxable income.
There are two ways for claiming business expenditure. If records were kept of all the actual expenses such as maintenance, license, fuel etc. then the actual expenditure can be claimed. Alternatively, you can claim the deemed rate per kilometre for each business kilometre travelled. The deemed rate can be determined by using the table provided by SARS which contains rates according to the value of your vehicle. This calculation will be done automatically on eFiling.
It needs to be kept in mind that the claim will always be limited to the actual allowance paid. For example, if you received a travel allowance of R50 000 but your business expenditure was R70 000, then only R50 000 can be claimed as a deduction.
For detailed examples and information visit the SARS website.
Important technical detail: Make sure to tick the box next to the question: ‘Do you want to claim the expenditure against a travel allowance?’ and then you need to enter the details under the relevant section. If you received the allowance from your employer, the travel allowance will be reflected on code 3701 and 3702 on your IRP5.
Use of a company car
If you were using a company car, the employer would have taxed you on the fringe benefit value, which is calculated according to the value of the car. A logbook of business kilometres must have been kept to claim a reduction in the fringe benefit value on your individual assessment. Claims for maintenance, insurance, license and fuel will also only be allowed if accurate records were kept.
If the fringe benefit value was R160 000 and you travelled 12 000 kilometres of which 10 000 was for business purposes:
R160 000 x 10 000/12 000 = R133 333
A deduction of R133 333 will be allowed. This calculation will be done automatically on eFiling, once you have completed the relevant information.
- If you are younger than 65: Your actual medical expenses (out-of-pocket expenses) will be added to your deemed expenses to be able to calculate your total medical expenses. Deemed expenses are the contributions towards the medical aid in excess of four times the medical tax credit entitlement for the year. If your total medical expenses exceed 7.5% of your taxable income, the value thereof will be the allowable deduction. For example, if your taxable income was R100 000 and 7.5% thereof is R7500, then only the total medical expenses which exceed R7500 will be allowed as a deduction.
- If you are 65 or older, the total medical expenses will be allowed as a deduction.
- If the individual, his or her spouse or child is a person with a disability: Please refer to the detailed list on the SARS website containing the specific allowable expenses relating to disability.
For more information on all tax matters, you can visit the SARS website at www.sars.gov.za.