Owing money to the taxman will be more expensive from December 1 when the South African Revenue Service (SARS) raises the interest rate you pay on taxes due to a punishing 19 percent.
This means that the gap between the interest rate SARS charges and the prime rate charged by banks is closing, says Leon Swanepoel, a Price Waterhouse Coopers tax director.
He says the increase in interest rates on unpaid taxes from 16 percent to 19 percent should help to persuade taxpayers who preferred to owe the taxman rather than the bank to settle their outstanding accounts with SARS.
"At 16 percent, there might have been people who preferred to owe the money to the Revenue Service, not taking into account penalties, rather than to borrow from the bank at 24 percent or more to pay their taxes."
At the same time, the interest rate SARS pays you when you pay too much provisional tax will go up from 12 percent to 14 percent.
This money is taxable in your hands.
There is also a change to the interest rate affecting employees with company loans. At the moment, if your employer grants you a loan as part of a fringe benefit and if the interest rate charged is lower than 16 percent, you will be taxed on the difference in interest payable. From December 1, this rate changes to 19 percent.
Swanepoel says this means that if you are granted a loan at less than 19 percent, you will be taxed (at your marginal rate) on the difference between the sum payable in interest at 19 percent and the interest actually paid.
In some cases, he says, for instance where loans are made to finance share incentive schemes, the difference can be substantial.
You must make sure that the correct rates are applied, if you have a low-interest loan from your employer.
The rate of 16 percent applies for the period of the tax year before December 1, and 19 percent afterwards.