By Bertie Nel
The South African Revenue Service (SARS) announced that tax season opens on Friday, 7 July and will close on Monday, 23 October 2023.
Tax season brings with it an opportunity to possibly getting a tax refund rather than being surprised with a big amount owed to SARS.
You can maximise the tax returns you are eligible for by implementing the right strategies already from 1 March of any year, when the new tax year starts.
For the uninitiated, filing tax returns can feel like piloting the space shuttle, but it does not have to be that way. You just need to get your ducks in a row. It may be administratively cumbersome, but the reward of doing your returns right can be worth it.
Here are essential tips to help you stay financially ahead of the curve during tax season.
Tip 1: Get your documents in order
The first step to a stress-free tax season is gathering and organising your relevant financial documents.
This includes income statements, IRP5s, all tax certificates, as well as receipts for medical expenses paid from your own pocket (if not already noted on your medical scheme tax certificate), and any other relevant supporting records.
Keeping your documents in order will simplify filing your taxes and ensure you don't miss out on any credits due to you.
Tip 2: Leverage deductions and tax credits
Take advantage of legitimate deductions and tax credits to maximise your tax returns, where you are eligible for such returns.
In South Africa, examples of these include a portion of your medical scheme membership fees (where you pay such membership fees out of your own pocket rather than your employer deducting it from your salary), retirement annuity contributions, and donations to approved charitable organisations.
Ensure you claim all eligible deductions to reduce your taxable income.
Tip 3: Make the most of retirement savings
Contributing the maximum percentage allowed (27%) of your salary towards your retirement savings is an effective way to reduce your tax liability. Contributions made to a registered retirement annuity (RA) or an employer-sponsored pension or provident fund are tax-deductible, within certain limits.
Maximising these contributions can lower your taxable income and potentially increase your tax refund. Just be aware that certain retirement savings instruments are already tax-free and therefore not applicable to be included in your tax return.
Tip 4: Working from your home office
Even if you are permanently employed at a company, if you have been working from home mostly in the last tax year, you could claim for expenses.
According to SARS, if you work from home and has set aside a room to be occupied solely for the purpose of “trade”, you may deduct certain expenses incurred in maintaining your home office.
Your office must be located in a designated area or room in your home, specifically and solely allocated for business purposes. Furthermore, during the relevant tax year, the majority of your duties must have been carried out from this home office, accounting for at least 50% or more of your remuneration.
Tip 5: Speak to your financial adviser
Navigating the intricacies of the tax system can be challenging. Seeking guidance from a financial adviser or tax practitioner is highly recommended.
They can provide personalised advice, help you to ensure compliance with relevant laws, identify potential tax savings, and assist in creating a tax-efficient financial plan tailored to your specific circumstances.
As tax season approaches in South Africa, it’s crucial to adopt strategies to stay financially ahead. With careful planning and expert advice, you can take the first step on a journey to financial success and give you a reason to love tax season.
Bertie Nel, head of Financial Planning and Advice at Momentum.
*The views expressed here are not necessarily those of IOL or of title sites.
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