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Making sense of tax filing and rebates

| Economic factors

As tax filing season gets into full swing, Stephan Hartzenberg, product architect at 10X Investments, reminds taxpayers of the importance of understanding who needs to file a return to square things with the South African Reserve Bank.

‘Give them a finger, and they’ll take the whole hand,’ according to an old saying. “We saw some of that recently when SARS announced that it had raised the tax-filing threshold to R500,000 (from R350,000),” said Hartzenberg.

“Some hopefuls read this as the tax threshold increasing to R500,000, so much so that Sars was forced to clarify the issue two days later.”

The tax threshold marks the income level at which tax becomes payable after allowing for individual rebates. All taxpayers qualify for a primary rebate. Secondary and tertiary rebates apply for taxpayers over the ages of 65 and 75 respectively.

For the tax year to February 2019, the tax period related to the current filing season, the primary rebate was R14,067, meaning taxpayers did not have to pay the first R14,067 they accrued in tax so they owed the Receiver for tax only once their income exceeded R78,150 (18% standard tax rate x R78,150 = R14,067).

In the current tax year (to February 2020) the rebate is R14,220, meaning taxpayers start paying tax this year only when their income exceeds R79,000 (18% standard tax rate x R79,000 = R14,220), said Hartzenberg.

“If the tax threshold were increased to R500,000 for the 2020 tax year, Sars would lose R113,665 of revenue per taxpayer in that bracket. Government cannot afford such extravagant gestures at the best of times, let alone in the present climate. If it could, it would do so with loud fanfare, in the Budget speech, not by way of a mundane press release.

“Remember: if it sounds too good to be true, it probably is.”

Strict requirements for tax-filing exemptions

The tax-filing threshold refers to the income level beyond which taxpayers are required to submit a tax return. But the R500,000 threshold is just one of four criteria that Sars applies in exempting taxpayers from this task.

In addition, they must have received income from one employer only for the full tax year, they must have received no other income (e.g. car allowance, business income, rental income, taxable interest, or income from another job, or from an annuity), and they are claiming no additional deductions, such as for medical costs, RA contributions, or travel expenses.

“If the above criteria are all met, then you are not likely to owe Sars any money or be due a refund at year-end, unless your payroll department has made a mistake,” said Hartzenberg.

That does not mean you are not assessed, he stressed. “Anyone who has used eFiling will know that all the relevant data is already filled in, based on information provided by your employer. Sars is thus able to issue a simulated outcome and taxpayers can accept this outcome, or file an updated return.”

If your medical aid and retirement saving affairs are not tied to your employer, you must file a return. But you should then welcome this opportunity to claim your deductions and get a refund, said Hartzenberg.

“Another point to remember is that Sars requires anyone who submits a return to keep records for a minimum of five years. Even if you are not required to submit a return because you meet the requirements for exemption, Sars can request an audit of your tax affairs for the preceding five-year tax period.

“Ensure you keep record of your income(s), any claimed expenses, investment, retirement and medical aid tax certificates.”

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