Tax has a significant impact on the income received from different investments; some asset types are more favoured by the taxman than others.
The impact is brought home to investors when they fill in their annual tax return.
This week, in the last of the series on tax, part 9 of the tax return, which covers taxable income from investments, is considered.
The relevant figures can be picked up from the certificate (IT 3(b)) you should have received from each of the financial institutions in which your money is invested.
Fortunately, not all your investment income is taxable. As a general rule the dividends you receive from shares are not taxed, but any interest earned is taxed. But there are exceptions.
* Unit trusts - The income distributions you receive from equity and income unit trust funds comprises of both dividend and interest income. You are taxed on the interest portion only; the dividend portion escapes (your IT3(b) shows the split).
* Property unit trusts - Income distributions from these funds are treated entirely differently. The full distribution is taxed (because it's made up of interest and rental income).
* Interest - Generally, all interest income is taxed and must be recorded in part 9.
Taxpayers are granted some relief on their interest income. The first R2 000 of interest received is tax-free. As this exemption is granted to each taxpayer, a married couple can effectively have a tax holiday on R4 000 of their interest income.
If your total interest receipt is less than R2 000, you are required to record the details in part 9.
If you are married in community of property, the interest income received is shared with your husband. Remember to carry only 50 percent of the total amount to page 2 of your return.
If you receive income from letting out a property, the net amount of income (that is, after deducting expenses) is taxable (part 8 of the return). Suitable expenses include building maintenance, interest on mortgage bond and the letting agent's fee. Couples married in community share the net rental income.
You may be taxed on the profit you made on selling your shares. Part 12 of the return requires you to disclose details of any profit made from the sale of shares, gold coins and other assets.
When it comes to selling listed shares, the rule is that provided you sell the shares after having held them for five or more years, and you made the appropriate election in schedule A of your tax return, then your profit will be free of tax. The election you make is a one-off decision that binds all future shares sold by you.
Remember the deadline for submitting your tax return is June 7.
Before you send off your return, take heed of three tips sent in by a Cape Town reader:
1. Make a photocopy of your return and attached documents. You will need it when reconciling your return with the assessment you receive from your Revenue office, and also, when preparing next year's return.
2. Don't rely on the postal service - it takes too long and you may miss the deadline Deliver your return personally.
3. Calculate your tax liability/ refund before you send off your return - this helps when you receive your assessment.