I mean, this is clearly a rhetorical question. Of course, we all want to pay less tax! (in a way that is entirely legal). Considering the car crash that 2020 has been for most, we’re all trying to save every last Rand we can. Here are some ways to do this when it comes to the tax man, so you can hang on to as much of your hard-earned cash as humanly possible:
Give a little
Did you know that if you donate to a SARS registered charity, your contributions are tax deductible, up to a limit of 10% of your taxable income? These non-profit organizations have special approval by SARS not to pay any tax in South Africa on donations they receive. So, whether it’s to do with education, the safety of children or protecting the environment, choose a cause that means something to you. Make sure you get a tax certificate from the Public Benefit Organisation (PBO), in order to claim the deduction.
Tax-Free Savings Plans
You have until February 2021 to invest R36 000 into a Tax-Free Savings (TFS) Plan, entirely tax-free. These accounts were an initiative by the Government to encourage more of a savings culture in our country, so they’re a great option if you want to start saving for the future (which we all should be doing anyway). With a TFS plan, you don’t have to pay any tax on interest earned, any capital gains you accrue, or on any dividends you receive – so it’s a very nifty savings vehicle.
RAs & company pension funds
If you have a Retirement Annuity (RA) or the company you work for contributes to a retirement fund on your behalf, you may well be able to make additional contributions that are tax deductible. For example, if you are not a member of a Pension- or Provident Fund, you can invest up to 27,5% of your taxable income towards an RA, which is capped at R350 000 per year. There are some formulas involved, so please speak to your financial adviser, but it is another way that you can save for retirement in a tax-friendly way.
Use your medical aid tax credits
Contribute towards a registered medical aid each month? You automatically receive a medical tax credit for you as the main member, plus any dependents on your plan. You can deduct these tax credits from your tax payable, which lowers the amount of tax you pay.
These medical tax credit amounts are fixed amounts and don’t change based on your income or the type of plan you’re on. If your company pays your medical aid contribution, they can deduct the tax credits from the PAYE they’re deducting from your salary each month.
Monthly car allowance or a company car
Car allowances and driving a company car are considered fringe benefits which means that you do get taxed on them. But, if you’re diligent about keeping a detailed logbook about the mileage you do for work, you can claim some of that money back – so it’s worth doing.
Home office expenses
From endless Zoom calls to board meetings in our pyjamas, most of us have adapted pretty quickly to working from home during this pandemic. Perhaps you’ve really enjoyed this time and want to make a move towards working permanently from home? Would it sway you a little more if you knew you could write some of your rent off against tax?
Having a dedicated home office allows you to claim a tax deduction from SARS. The catch is that you have to be a full-time employee who spends more than half of your working hours working from your home office. To claim a deduction, you also need to have a specific part of your abode used exclusively as your office, i.e you can’t just declare your bedroom “your home office”. You then calculate the square meterage of your office as a percentage of the total area of your home. Again, consult a financial- or tax adviser in this regard, but every little bit help right?
We hope these tips help you pay a little less tax, so you can use that extra cash to cover other expenses, in what has been a very financially (and emotionally) challenging year.
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Until next time.
The Wise About Life Team