Remember that when you fill in your tax return, you do not prepare any tax
calculations on the tax return itself. All you do is provide information as
to what happened during the tax year - the Receiver does the calculations
for you.
However, it is important to include a separate sheet showing what you
expect to see as an outcome from the Receiver's assessment. It is these
separate calculations that will be our focus for the next few weeks.
Keep this week's article and read it in conjunction with next week's, as
space does not allow me to present one full example here.
Let's assume that you have just been appointed to new post and your salary
package still has to be decided. Follow these basic steps.
1. Ask your employer exactly how much will be spent on you (in total) as an
employee in the company. Let's assume it's R60 000 a year.
2. Subtract all the company contributions. These are normally included in
the salary offers that you see in the newspapers. Assume that you and your
employer will together contribute R5 000 a year to your medical, provident,
pension funds - then subtract R2 500 from the R60 000.
3. You are then left with R57 500 but from this amount you still need to
pay your own contributions to the medical, provident, pension funds - R2
500.
4. You will then be left with R55 000 which you can "structure", that is,
allocate it to different allowances so that in February expenses incurred
from your own pocket on behalf of your employer can be allowed as
deductions.
5. Assume that you will be a fashion consultant at a clothing shop and are
expected to do the following:
* Visit potential clients to market the product using your own car (not a
company car or pool car);
* Take those clients to restaurants for meals and so on from your pocket;
* Go away for a few days from time to time to make presentations to clients
out of town;
* Use a cell-phone and pay the full bill;
* Belong to the Association of Fashion Consultants, for which you have to
pay R200 a year;
* Demonstrate the products to potential clients; and
* Use a computer sold to you by your employer.
6. Two critical points to remember are that firstly, all the above must be
on your letter of appointment or other binding agreement with your
employer. Secondly, you have to go through this process of structuring your
salary before your employer pays. Trying to structure your salary later
will not assist you as the structure is not retrospective.
7. From the above, you can prepare a structured salary - I will show you
how it works next week.