If like me your financial experience percentage is a hopeful five, hearing the word tax might be enough to make you grab the alcohol at noon already. Being the rookie I am, I thought it would be beneficial to write an article for the amateur to make tax less daunting instead of an alcohol driven undertaking for the first-timers.
The first thing you need to know is that if you earn less than R75 750 a year, and you are younger than 65, then this article is not for you as you are beneath the taxable bracket. However, you should be aware that you need to be registered by your employer as a taxpayer regardless of your tax liability.
Whether you are for it or against it, South Africa has progressive income taxation – which means the wealthy pay more towards tax than those not as well off in supporting the State.
We are currently in the 2018 year of assessment. The financial year runs from the 1st of March until the 28th or the 29th of February.
According to the SARS website if you answer yes to any of the following questions, you should please submit an income tax return:
- Did you conduct any trade (The term “trade” for finding out whether to submit a return means every profession, trade, business, calling, occupation or venture, including the letting of any property but excluding any employment.) in South Africa?
- Did you receive an allowance such as a travel, subsistence or office bearer allowance? Check your IRP5/IT3(a) if unsure.
- Do you hold any funds or assets outside South Africa that have a value of more than R225 000 at any stage during the tax year?
- Did you have Capital Gains or Capital Losses exceeding R40 000?
- Was any income or a Capital Gain in foreign currency or assets outside the Republic attributed to you?
- Do you hold any rights in a Controlled Foreign Company?
- Did you receive an Income Tax Return or were you asked to submit an Income Tax Return for the tax year?
Your employer might give you the IRT12 form, or they expect that you do e-Filing to which I will get in a moment.
Getting back to business, the first step is to register as a taxpayer, no matter who you are. SARS is the only place this can be done. Secondly, you will need to know if you are liable for tax with the above guidelines. If you are liable, then step three is the completion of the IRT12.
A physical IRT12 (which can also be acquired from a SARS branch, or phoning them to post it to you), as well as e-Filing, needs to be submitted by the dates SARS provide. If it is not, you are accountable for penalties. SARS has great campaigns every year to inform the taxpayer of submission due dates.
As we live in the modern world the number of people wanting to complete a physical form decreased rapidly and SARS thankfully kept with the times and gifted us e-Filing.
After speaking to the laymen about e-Filing, I was told that if you do not understand it, opt for the call back option and force them to explain it to you step by step. Phoning them is as useless as talking to a rock.
You first need to register for e-Filing, which can be done online. I propose giving yourself the necessary time to register as accurately as possible and making sure you understand what goes on. Once this is done you can do your e-Filing via the SARS website or their app.
So we have gotten this far and it seems easy enough, but what do we need to complete our IRT12 form?
- IRP5/IT3(a) Employees’ Tax Certificate (if applicable)
- Certificates received for local interest income, foreign interest income and foreign dividend income.
o If you are married in community of property, the certificates received by both you (the taxpayer) and your spouse are required.
o If you are married out of community of property, only the certificates that you receive are required.
- Documents relating to medical expenditure such as:
o The tax certificate received from your medical scheme for the financial period (if you belong to a medical scheme)
o Proof of qualifying medical expenses paid by you and not recovered from a medical scheme.
o Completed ITR-DD Confirmation of Diagnosis of Disability form (if you want to claim disability related expenses)
- The income tax certificate(s) received from the financial institution for retirement annuity contributions made.
- If you received a travel allowance or a fringe benefit for an employer provided vehicle, you must have a logbook to claim the business travel deductions.
- All information relating to capital gain transactions (local and foreign)
- Documents and receipts for commission related expenditure including a logbook to claim business travel deductions.
- All information relating to the letting of assets.
- Financial statements for trading and farming activities (if applicable)
- Any other documents relating to income that must be declared or deductions that may be claimed.
It is important to note that the above-mentioned documentation is necessary for the completion of the form and not meant to be attached anywhere. You are required to keep the documentation however for five years from the point of submission, should SARS want to verify anything declared on your form.
The first page of the IRT12 consists of personal questions from which the rest of the form will be customized according to your answers.
You may be wondering, “What is all this trouble for?” Simply put, each month PAYE (pay as you earn tax) is deducted from your salary by your employer which they pay to SARS. That PAYE gets treated as advance payments of income tax due. In cases where the PAYE deducted is too much, such as where you have other deductions like medical aid or retirement annuities, you can get some of your money refunded from SARS. In other cases, where you do not have these deductions and only PAYE gets deducted you might not get anything back – which is neither good nor bad. Because SARS still gets the amount they need from you regardless.
It should be remembered that this is a very basic article. It is suggested that you do further research when doing your own tax. This article is merely intended for those who have never done tax to understand the task that may be ahead of them. Additionally, having a conversation with family or friends can be significantly constructive.
Credit to the SARS website, as well as PATC.