How to minimise your tax burden, ahead of time
Having recently filed your 2022 Income Tax return as well as your 2nd Provisional Tax return for 2023, the last thing on your mind is your tax affairs for the 2024 tax year. However, by implementing consistent record keeping and making use of SARS’ current and more recent rebates and tax breaks, will help you be well-prepared – ultimately saving you time, and money, come February 2024.
“While the deadline to submit your 2024 Income Tax return may seem like a long way off, there is merit in keeping on top of your tax matters throughout the year and being aware of all available ways to mitigate your tax burden,” says Morné Janse van Rensburg, Manager at Hobbs Sinclair Advisory.
Some tax deductions or rebates are more well-known than others but here are a few tips on how to correctly benefit from the lesser- or better-known:
Leading with the newest tax rebate, only valid for the 2023/24 tax year mind you, you would be remiss not to get on to this bandwagon sooner rather than later as stock is already limited, and the waiting lists are a few months in. Individuals who install new, unused solar PV panels between 1 March 2023 and 29 February 2024 will be able to claim a tax rebate to the value of 25% of the solar PV panels, capped at a maximum of R15 000 per individual. Solar PV panels must be installed at a residence that is mainly used by an individual for domestic purposes.
PAYE taxpayers can then claim the rebate on assessment during the 2023/24 filing season, while provisional taxpayers can claim it against their provisional and final payments. It is worthwhile noting that only the individual who pays for the solar panels can claim the rebate, and that the solar panels must be brought into use on or before February 2024, accompanied by a Certificate of Compliance to qualify for the rebate.
As the main member on a medical aid, you qualify for tax credits as a result of your monthly medical aid contributions. Furthermore, you may also qualify for additional medical aid tax credits based on medical expenses which you paid for yourself or your dependents and which were not refunded to you by your medical aid. These expenses include:
- Services rendered and medicines supplied by any duly registered medical practitioner, dentist, optometrist, homeopath, naturopath, osteopath, herbalist, physiotherapist, chiropractor or orthopedist;
- Hospitalisation in a registered hospital or nursing home;
- Home nursing by a registered nurse, midwife or nursing assistant, including services supplied by any nursing agency;
- Medicines prescribed by any duly registered physician (as listed above) and acquired from any duly registered pharmacist;
- Expenditure incurred outside South Africa in respect of services rendered or medicines supplied which are substantially similar to the services and medicines listed above;
- Any expenses prescribed by the Commissioner and necessarily incurred as a result of any physical impairment or disability.
Oftentimes, taxpayers do not submit these expenses to their medical aid either because their medical savings have already been exhausted for the year or they know that their medical aid plan would not cover a portion of the expenses.
However, even if you pay for the expenses in full, it is imperative that these are submitted to your medical aid so that they can include these on your Income Tax certificate for the tax year. Although SARS is fully within their rights to request the invoices and proof of payments for these expenses, they are less likely to query the expenses if they are disclosed on your medical aid tax certificate.
The new, monthly medical scheme fees tax credit rates for 2023/4 are:
- R364 for the main member
- R364 for the first dependant
- R246 for each additional dependant
Retirement annuities (RA)
Although there are no limits to the amount you can contribute to your retirement annuity each year, there is a limit on how much of these contributions will be deductible for tax. Currently, the allowable deduction is limited to 27.5% of your remuneration or taxable income (whichever is higher), to a maximum of R350,000 per year.
If your annual contribution is more than the maximum, the difference is carried forward to the next tax year for potential deduction. Furthermore, if the allowable deductions are not exhausted over the total contribution period, they can be offset at retirement to increase the tax-free portion of the lump sum you receive when you retire.
Although many taxpayers are aware of the available deduction, some often wait until the very end of the tax year to determine how much extra they can contribute for a further tax deduction. Oftentimes, although they wish to make an additional investment, they cannot do so due to insufficient liquidity. However, had they monitored both their cash flow and estimated tax liability throughout the year, this could have been avoided.
You can claim a tax deduction for any donations made to a SARS-approved Public Benefit Organisation in a given tax year. However, this is limited to no more than 10% of your taxable income before taking the deduction into account. Upon making the donation, the organisation should issue you a Section 18A certificate specifying the date and value of your donation together with their relevant details. Any donations that are claimed for tax purposes without this certificate would be disallowed by SARS.
Your tax practitioner will be better able to guide you through the available tax incentives and benefits, and compliance issues, but it is up to you to start early and stay on top of things and avoid that last-minute, frantic rush before the tax/filing deadline.