Income Tax Tip 1: Assessed Losses
If your business expenses exceed the income for the tax year then you’ll end up with an assessed loss for tax purposes. SARS allows you to use the assessed loss against future taxable income. The loss can be carried forward indefinitely, provided you continue to trade. If there is no trading at all during a tax year, the assessed loss will be forfeited.
Income Tax Tip 2: Family Members on Payroll
If your spouse and children work for you, make sure they actually do some work!
If family members on your payroll perform no work, SARS can disallow the business expense claimed.
Income Tax Tip 3: Interest received from SARS
If you receive interest from SARS, then it’s taxable in your hands. Declare the interest in the correct financial tax year.
Income Tax Tip 4: Fictitious Workers on Payroll
Never create fictitious workers. SARS can request a list of your wage register and your expenses is also scrutinised for possible payments made to employees.
Income Tax Tip 5: Traffic Fines
Traffic fines and other similar penalties can’t be deducted from income tax.
Income Tax Tip 6: Keep a Logbook for your Company Vehicle
If you can prove to SARS that you’ve used your company vehicle for less than 10 000km private use, you can claim a refund of your personal income tax return.
Income Tax Tip 7: Independent Contractors
Where an individual who is an independent contractor receives regular payments from you or is subject to your supervision and control, you must withhold employee’s tax.
The fact that they are registered as provisional taxpayers and/or charge VAT on their invoices will make no difference.
Income Tax Tip 8: Declare your Foreign Dividends
If you’re a minority shareholder in a foreign company, the dividends you receive will for the most part not be exempt from income tax.
However, for the tax year ended 28 February 2009, the first R 3,200 of foreign dividends will be exempt.
Income Tax Tip 9: Buy and Sell Policies are Completely Exempt
Buy and sell policies and key person assurance policies are completely exempt from estate duty.
Income Tax Tip 10: Assets Donated to a Spouse Attract no Donations Tax
No donations tax is payable when assets are donated between spouses. There’s no risk therefore in giving your spouse assets or, transferring money into your spouse’s name.
Income Tax Tip 11: Bequeathing Outstanding Loan Accounts
If a testator bequeaths an outstanding loan account to the person or entity owing it to him, it will trigger capital gains tax because this is regarded as a debt that has been written off.
One way to avoid the capital gains tax implication is by bequeathing the outstanding loan account to the testator’s spouse.
Income Tax Tip 12: Recovered Legal Cost is Taxable Income
If the CCMA or Labour Court awards you legal costs, these recovered cost become taxable.
Income Tax Tip 13: Claimed Medical Expenses
You can only claim medical expenses actually paid by you. You can’t claim your unpaid medical bills.
Income Tax Tip 14: Medical Expenses – Older than 65
You can claim all medical expenses if you are older than 65 years.
Income Tax Tip 15: Tax Directives for Retrenchments
Apply to SARS for a tax directive when an employee is retrenched. If you don’t apply for the directive, you have not complied with the provisions of the Income Tax Act.
Income Tax Tip 16: Payroll Compliance
Since payroll is such a huge component of the tax net, it’s an obvious target area for audits by SARS. It’s vital that you pay close attention to your compliance strategies. A small investment in time, thought and planning could potentially save you penalties.
Income Tax Tip 17: Pay your Employee’s Tax
Don’t withhold employee’s tax. Don’t apply any deducted employee’s tax for anything other than payment to SARS.
If you’re caught, you’ll be liable to a fine or imprisonment for a period of up to 12 months.
Income Tax Tip 18: Keep Records for 5 Years
SARS require that you keep all records for a period of five years from the date of the last entry.
Income Tax Tip 19: Unused Subsistence Allowances
If you pay a subsistence allowance to an employee, but that employee doesn’t travel for business purposes, to the extent of the allowance granted, by the end of the following month the allowance becomes subject to employee’s tax in that month.