The taxman loves employees. They are easy to tax, not many escape the tax net, and there are few deductions they can claim.
When it comes to tax, it's far better to be self-employed as there are so many more tax planning opportunities. Nevertheless, there are a couple of deductions granted to the employee.
The previous three columns have focused on filling in the annual tax return (IT12). This week, three more deductions are considered.
RETIREMENT ANNUITY DEDUCTION
You can deduct your contributions to your RA funds, but within certain limits. In your return, insert the amount of contributions you actually paid as the taxman's computer calculates your deduction.
Married women rejoice! This tax year marks the first that you can claim the same deduction as your husband - previously, married women were permitted only half the deduction limits granted to other taxpayers.
Your RA deduction is calculated as the greatest of the following three amounts:
* R1 750;
* R3 500 less the tax-deductible portion of your pension fund contributions;
* 15 percent of your non-retirement funding income (NRFI).
This long-winded term refers to your taxable income excluding the portion of your salary on which your employer bases your pension fund contributions.
Not all of your salary income is included in your employer's calculation of your pension contributions. Often, bonuses and fringe benefits are ignored. Such amounts may therefore be included in your NRFI.
The issue of the travel allowance fringe benefit can be confusing. The latest rule is that if your employer excluded the allowance from the pension calculation, you may include only the taxable portion of the allowance in your NRFI (the taxable portion is the amount by which the allowance exceeds the cost of your business travel).
If you are in a non-contributory provident fund (that is, your employer pays your contributions and lops the amount off your pre-tax salary) you cannot include the relevant part of your salary in your NRFI.
Self-employed people will obviously include their business net profit as well as other income in their NRFI.
Remember that if your RA tax deduction comes out at less than your contributions, you can carry the unclaimed portion into the next tax year for inclusion in your deduction under this section.
There is another provision which affects married couples. If a married woman took out an RA policy before March 1 1992, she can elect to either claim her contributions in her tax return or let her husband claim her contributions as his own. This concession lasts until the 1997 tax year. Couples would opt for the concession if the husband has a higher marginal tax rate than the wife.
* ARREARS RA CONTRIBUTIONS
This deduction is limited to R1 800 a year, and applies to the contributions paid when you reinstate a paid-up RA policy. Any excess contributions can be carried forward to the next tax year. Married women may celebrate - last year they were allowed to claim only R900.
* ENTERTAINMENT EXPENSES
It's fairly common for employers to grant certain employees an allowance to cover them for the costs of entertaining clients (these costs are not specifically re-imbursed by the employer). This allowance is taxed as normal salary income and it should be separately stated on your IRP5.
Under this deduction the employee has to state the actual costs paid for the purpose of business entertaining. A schedule, but no vouchers, must be submitted giving details (see the information brochure supplied with your tax return).
This deduction is calculated as the lowest of the following amounts: your allowance; your actual costs; R300 plus five percent of your trade (or salary) income; or R2 500. But if you earn commission income you can claim all your costs. Not every taxpayer is entitled to claim entertainment. You must receive an allowance from your employer and the taxman has to be convinced that it's part of your regular duties.