112 Tips to save on your tax return – LEGALLY

 

Medical Aid

  1. Submit all medical expenses to your medical aid even if they don’t pay the expense. The amount will be put on your certificate and can be considered for credits when your return is done.
  2. Make sure to keep proof of payments for any medical expenses claimed as the lax laws work on when an amount is paid for medical and not incurred as it works with business.
  3. When submitting your return to SARS and claiming expenses not paid by the medical aid, draft a summary of these expenses and submit this to SARS with the 10 largest invoices and a statement that you are able to provide other medical expenses upon request.
  4. Make sure that you do not use the amount on the medical certificate “claims not paid by the medical aid” in your summary. This may constitute a duplicate expense and may cause SARS to disallow your entire claim.
  5. In the above case, you will have to show in the benefit statement that the expense you are claiming was not paid by the medical aid by reference to the medical aid benefit statement.
  6. Make sure you have the invoices per your summary available in case SARS request them. You have to keep them for a period of 5 years from the first day of the next year after submission.
  7. Verify if any family member qualifies as being classed as disabled which has a wildish definition.
  8. When your return goes under audit, make sure to submit the documents immediately and that your contact details are readily available in your Dear SARS letter.
  9. If disabled, make sure you claim everything you can as it is possible to go beyond the medical costs incurred.

 

Commission claims

 

  1. Keep all invoices for expenses against your income
  2. Make sure the invoices are correct such as a tax invoice and not a quote
  3. Keep business expenses separate from private expenses on the slips
  4. Get a letter stating that you are working from home if this is the case (Or that you are working mostly from home)
  5. (See home office expenses)
  6. Apportion expenses that are both private and business as this in in line with the income tax act and is good practice.
  7. Make sure the claims are correct per the income tax act as any correction by SARS can mean an understatement penalty
  8. Please use the actual cost method when claiming travel costs as the deemed method would not be technically correct since Section 11a states that an amount should be “actually incurred”
  9. Claim entertainment expenses but avoid weekends or days where it is clearly a private use expense.
  10. When using a car under an instalment sale agreement, wear and tear according to the capital allowance section should be written off over 7 years straight line.
  11. When an agreement is a finance agreement, the monthly rental is the “actual cost” so use this amount paid
  12. Add other costs such as petrol, repairs, insurance and other costs directly attributable to the car
  13. Have a logbook to show the % business and private
  14. Claim only the % of business travel against your total cost of the car
  15. Have a table to show the calculation and have any of the documents ready as they may be requested.
  16. Have a summary of all expenses ready for submission to SARS
  17. Submit only the important documents during the first stage of audit and wait for SARS to get request further documents
  18. The above documents to be submitted should be only the summary, car purchase agreement, logbook and 1 or 2 big expenses along with your other docs such as your medical, RA, etc.
  19. Do not confuse SARS by submitting all the documents as this could lead to further questions and your case being disallowed (Very important)
  20. Name your documents properly before sending this to SARS and add a covering letter explaining how the costs are incurred in the production of income.
  21. If you used a tax practitioner, please remember to claim the full cost of their fees
  22. Don’t claim expenses out of period and understand the principal of accrual for expenses.

 

Travel claims

  1. Complete your return in accordance with your logbook – do not submit the return and then quickly design a logbook if there is an audit. Therefore, keep a day to day record of your travelling.
  2. If you are not sure of anything on your logbook, please get professional advice and pay those fees rather than sit with an entire claim being disallowed and getting a penalty. Professional tax assistance is cheaper.
  3. Make sure that the value of the car matches the purchase agreement
  4. Do not claim for a car before you have the car. If the purchase agreement states you had it from 1 April, don’t claim from March as this would be impossible and could lead to your case being disallowed and a penalty for negligent submission
  5. Do not add finance costs as part of the cost price of a car – this costs clearly does not form part of the value of the car
  6. Submit your purchase agreement with the logbook as a standard
  7. Do not delay in submitting documents to SARS. The return should be filed with the documents so if there is an audit, you should be able to submit the documents immediately.
  8. Make sure that your logbook odo as opening km matches the last year. If not, see professional assistance
  9. Your service records should be in-line with your logbook and If not, this could be a serious offence as this would mean that the logbook was drawn up after year end
  10. Your logbook also has to make sense with your leave taken by your company. SARS can ask this information from your company as part of their 3rd party verification.
  11. Don’t get irritated with SARS, always deal with them professionally but in writing and not verbally as then there is a record of discussion with them.

 

Home office expenses

 

  1. Make sure you have all the correct documents to claim for a home office before putting in such a claim
  2. Documents to have is a letter stating you are working from home, a sketch of the property showing the area used for business, expense documents such as IT3B , water and lights, etc
  3. When submitting documents to SARS for this type of audit, make sure that there is a summary of expenses
  4. Have each document under an audit file for the expenses claimed as SARS may ask these and failure to supply can lead to an understatement penalty
  5. Make sure that you home office shows that you are using a certain area exclusively for business as well as regularly
  6. Don’t have any personal item in your home office as this will mean that you are not using the area exclusively for business
  7. Make sure you don’t have to walk through your office area as then your home office is not used exclusively for business and SARS may correctly disallow your entire claim and issue an understatement penalty
  8. Claim the full costs of your building such as water, lights, interest on the bond.
  9. If the property is purchased by yourself, keep in mind that the area used as a home office will not qualify as a primary residence and therefore CGT could be possible on this section.
  10. Make sure the above calculation is correct as the property may have been used a number of years as a primary residence and a number of years as a home office. (An apportionment is necessary)
  11. Make sure that documents are kept for any capital work done on the property as well as transfer fees, etc

Earning interest

  1. Make sure that all sources of income are disclosed to SARS and that there is a workings table to arrive at the totals submitted to SARS
  2. Use a tax practitioner as the fees paid to tax practitioners may be and probably will be deductible against your taxable interest.
  3. Make sure you are a registered as a provisional taxpayer
  4. Submit your provisional returns each August and each February and don’t be late
  5. Pay your taxes before the deadline which is the last working day of August and the last working day of February each year. Getting this wrong could mean a penalty
  6. Submit your provisional return using a reasonable calculation but at least use the basic amount as when this is done, your risk is lower.
  7. Don’t try and pay the above amount when filing the return after year end (which is when returns are filed) as this could mean a penalty of up to 20% + interest.
  8. Claim any tax practitioner costs incurred in filing your return if the fee is not more than the taxable portion of the interest.

 

Dealing with audits

  1. When submitting a return and there is an audit, submit the supporting documents without delay
  2. Make sure that all the relevant documents are submitted the first time
  3. Avoid re-filing the return and if this is required, consider seeking professional assistance
  4. Allow SARS their 30 working days before following up on the audit
  5. When following up on an audit, keep the reference number as this could be important in the future
  6. SARS has 90 days to provide feedback per the tax administration act so once they have gone over this period of time, a reference number is required.
  7. Once sufficient time has gone by, submit a complaint to SARS
  8. Should the above step not be dealt with, submit a complaint to the tax ombud
  9. Admit any mistake made on the return as SARS can impose a lower penalty when there is cooperation
  10. Do not get irritated with any auditor or SARS consultant as this will not facilitate a result.
  11. Keep all documents in an audit file for a period of at least 5 years.

 

Objections

  1. Avoid an audit by submitting the documents correctly during the first audit and dealing with the audit.
  2. If the above fails, make sure to submit your objection within a period of 30 working days from the date of the final assessment
  3. Make sure that you have proper grounds and explain the grounds in detail before submitting the objection
  4. Make sure the correct codes are used during this process
  5. Allow 60 working days before following up on the objection
  6. Make sure that once a result is obtained and this is not favourable, that an appeal is perused soonest
  7. Any delay in the above will cause the assessment to be final
  8. If you have gone over time to do the objection, give a good reason for the late submission
  9. Should your objection be made invalid due to the above turnaround time, re-submit your objection with more detail on the reason for the late objection being submitted.
  10. Should you get any objection invalid, seek professional assistance, don’t try and do this yourself unless you are very familiar with the laws on dispute resolution
  11. If the objection was done correctly and disallowed and now an appeal is done, SARS has 90 working days to resolve this matter
  12. Generally and from our experience, SARS exceeds this time and an escalation should be done with the contact centre in order to get a reference number to complain
  13. Should the above complaint not be attended to, complain with the tax ombud.
  14. Generally the above will lead to SARS arranging an ADR or alternative dispute resolution. You will now have a chance to argue your case with a facilitator and the auditor directly.
  15. Aim to have an agreement or compromise arranged to here as this is your last chance before going legal and incurring huge costs.
  16. Suggest that a professional be used from as early as the return being submitted to avoid this but if not, that an objection is done using professional assistance as getting it wring from the beginning could seriously prejudice the final result of your return.

 

General

  1. Consider getting a retirement annuity as the deductions are tax deductible

 

Rental

  1. Make a summary of income and expenses based on the documents you have
  2. Deduct costs incurred to generate the rental income. This includes agent fees, levies, rates and taxes, etc
  3. Make sure to retain the above documents and have them available upon SARS request.
  4. Deduct expenses paid to a tax practitioner to file a return with a rental property on it.
  5. Capital expenditure should not be claimed as an expense as it is a capital item. It can however, be deducted as a wear and tear cost
  6. Make sure to have a capital cost table with calculations such as additions, tax base, etc.
  7. Do not take money from your bond unless it is going to be spent on the property as the interest paid to the bank could be in jeopardy and this is the biggest expense. (This is very important)
  8. Get professional advice before doing anything to the property or the purchase of a new one or additions to the property.
  9. If there are any legal costs, make sure these costs are incurred in the production of income, write a letter to SARS as legal cost are generally considered capital expenditure and therefore not tax deductible.
  10. Consider, with consultation, to deduct bond registration costs as a revenue expense against the rental property. As this is a legal cost, please do this under the guidance of a tax professional
  11. Declare income that you are entitled to but have not received as this is required per section 1 of the income tax act
  12. The above amount may be written off as a bad debt once you accept the loss and take no further legal action
  13. Consider deducting a provision for a bad debt but remember that this provision has to be written back in the next year and can then be re-considered in this year or written off subject to the above item.
  14. Discuss the possibility of ring-fencing a loss to a future year but each situation is different so advice is required here.