When can you legally escape paying tax and when not?
Firstly, to evade tax is illegal. To avoid tax in the view of most tax advisers is not only legal, but also a right.
Certain definitions have to be met before the taxman can take action against tax avoidance schemes. The definitions are complex as are many of the schemes and have been debated long and hard by tax experts.
Until amendments were made to legislation this year there were a number of basic tests set by the Income Tax Act, according to accounting company Kessel Feinstein.
Firstly, there has to be a transaction, operation or scheme entered into or carried out. That is, you cannot create a fictional transaction to limit payment of tax.
The transaction, operation or scheme must not have the effect or purpose of avoidance, postponement or reduction of tax.
The taxman will also consider:
Whether the scheme was entered into or carried out in a way not normally employed in such a scheme; or
Whether it created rights or obligation which would not normally be created between people dealing at arm's length from each other.
To most people a lot of this is gobbledygook.
Even the taxman apparently thought all this did not have enough definition and that it was easy to avoid tax.
So, this year, the legislation was amended as far as businesses, but not individuals, were concerned.
The test for business now is that any scheme has to be entered into in a way that would be employed normally for bona fide business purposes.
Tax experts say it is difficult for you to know whether you are acting inside or outside the law.
If the taxman does not like your scheme he can reject it.
Then it is up to you to appeal against the decision.
Most avoidance schemes used by individuals involve what are called "salary sacrifice schemes" where, for example, an employer pays the pension or medical aid contributions of an employee.