Daniel Baines - How to Get a SARS Refund

How to Get a SARS Refund
Published by Penguin Books
an imprint of Penguin Random House South Africa (Pty) Ltd
Reg. No. 1953/000441/07
The Estuaries No. 4, Oxbow Crescent, Century Avenue, Century City, 7441
PO Box 1144, Cape Town, 8000, South Africa
www.penguinrandomhouse.co.za

First published 2021

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Publication Penguin Random House 2021
Text Daniel Baines 2021

Cover image Shutterstock.com

All rights reserved. No part of this publication may be reproduced,
stored in a retrieval system or transmitted, in any form or by any means,
electronic, mechanical, photocopying, recording or otherwise,
without the prior written permission of the copyright owners.

ISBN 978 1 77609 653 4 (print)
ISBN 978 1 77609 654 1 (ePub)

CONTENTS

I dedicate this book to my wife, Jocelyn,
for all her support; and to my parents, Gary and Angela,
for providing me with an education. And a special thanks
to my dad for his help in improving the book.

The author has put many months of work into researching and writing this book. This ebook is NOT free, and should be bought from an ebook retailer. If you are circulating it for free, you are breaking the law and can be prosecuted under the Copyright Act 98 of 1979.

INTRODUCTION

Salaried employees are in the unfortunate position that they are severely limited in terms of the tax deductions they are allowed to make. There are, however, numerous ways in which they can reduce their tax burden.

This book explains the fundamentals of income tax and tax deductions in South Africa, with a specific focus on salaried employees. Its aim is to enable taxpayers to gain a thorough understanding of South Africas individual tax laws and to use this knowledge to their full advantage to reduce their tax liability and increase the likelihood of receiving a refund from the South African Revenue Service (SARS). Information is also provided on the various tax laws pertaining to different types of income, including income from investments and gains made on the sale of property.

Detailed and easy-to-understand examples illustrate how to calculate your tax liability and make maximum use of admissible deductions, as these can greatly reduce your tax liability.

Tax deductions for commission-earning employees and independent contractors are also discussed. Such persons are able to access greater tax benefits, as they can deduct business-related expenditure (including mobile phone, travel and entertainment expenses) that they incur to produce their income.

An understanding of the topics covered will allow taxpayers to better evaluate their current circumstances and determine ways to reduce their tax liability, thus increasing their chances of receiving a refund from SARS upon filing their annual tax return.

A note of caution: While there are many ways to reduce your tax burden, there are no guarantees. Whether you receive a refund from SARS will ultimately depend on your overall tax situation.

The tax figures used in this book are for the 2022 tax year as announced in the Budget Speech on 24 February 2021. These figures must still be passed into law.

The remainder of the book is based on the law as it stood when this book went to print. Please note that tax laws are subject to frequent change.

DANIEL BAINES
MAY 2021

Chapter 1

THE BASICS OF UNDERSTANDING INDIVIDUAL TAX

If you derive your income from salaried employment and wish to utilise the tax laws in South Africa to minimise your tax liability and maximise your refund from SARS upon filing your annual tax return, this book is for you. It will also help you navigate your way through the income tax return for individuals (a form called the ITR12) if you use SARSs eFiling option.

1.1 YOUR ANNUAL TAX RETURN

All salaried employees have a tax called PAYE deducted from their salary on a monthly basis. PAYE is not a special type of tax it is merely income tax that is levied on your salary by SARS.

Perhaps you have seen the acronym PAYE on your payslip, or your employer mentioned it. PAYE stands for pay as you earn, and it means that you pay the tax you owe to SARS on a monthly basis instead of all in one go at the end of each tax year. Essentially, this method of paying tax means that you avoid having to pay between 18% and 45% of your earnings to SARS in cash as a lump sum once a year.

Your employer will calculate your PAYE on your behalf and pay this amount directly to SARS before your salary is paid to you. The amount of PAYE that is deducted from your salary each month will depend on several factors. (Later in this chapter, I discuss in more detail how PAYE is calculated.) Your employer must upload your IRP5 onto eFiling. Your IRP5 is the document that details your income and the PAYE your employer paid to SARS for the tax year in question. When you log on to eFiling to complete your tax return, the information should already be available.

The tax return that you fill in on eFiling is called an ITR12. This will contain your IRP5. (If you were employed by more than one employer during the tax year, or if you had more than one job, then you will have more than one IRP5 included within your ITR12.) The ITR12 will also contain other relevant information relating to your tax status, such as certain prepopulated deductions and fields where you can insert your other allowable deductions.

Salaried employees tax benefits are severely limited. (Businesses, by contrast, have far greater benefits.) However, a significant number of benefits are available if you understand how the South African tax system works. In the following chapters, I will provide detailed information on these benefits and show you how you can take advantage of the various provisions in the Income Tax Act No. 58 of 1962 to help you capitalise on the avenues available to you for receiving a refund from SARS.

In addition, the following taxes that may apply to salaried taxpayers are also discussed:

dividends tax;

tax on interest earned;

capital gains tax (CGT); and

provisional tax.

CGT and the provisions and benefits of it that relate to individuals are covered in .

To begin with, let us unpack the important concepts that taxpayers need to understand clearly if they want to benefit from South Africas tax laws. The first one is the tax threshold. (Note that the tax rates used in this book are those specified by SARS for the 2022 tax year. These rates change each year. You can find the latest tax-rate tables on the SARS website at www.sars.gov.za. Full URLs are provided in the References section at the back of this book.)

1.2 THE TAX THRESHOLD

The tax threshold is the minimum salary that you must earn before your employer will deduct PAYE from your income. This means that if your salary is below a certain amount per annum, your employer does not need to deduct PAYE. For the 2022 tax year, the threshold is R87 300 if you are under 65 years of age. This threshold increases if you are over 65 (the tax implications of being over this age are discussed in later chapters). If you fall