For individuals, the 2014/15 tax-filing season begins today (1 July), and all returns must be completed by the end of November.
Tax expert Ettiene Retief, chairperson of the National Tax and Stakeholders Committee at the South African Institute of Professional Accountants (SAIPA), offers some tips.
“SARS continues to focus on compliance, and has targets to meet, so my key advice is to be accurate, be on time and, above all, make sure you have the supporting paperwork,” Retief says. He highlights several issues that, in his experience, often trip taxpayers up.
Medical expenses not covered by medical aid can be claimed by those over the age of 65 or by those suffering certain types of disability. If a claim is made in respect of this disability, make sure that the requisite SARS form accompanies the claim – it may be downloaded from the SARS website. Other taxpayers may only claim for out-of-pocket medical expenses if they exceed 7,5% of their total income.
“Just be aware that SARS will ask for the supporting documentation for any out-of-pocket medical claims – make sure you have it,” Retief advises.
The need for documentation is also vital when making a claim for business-related travel in a private vehicle. Retief says that keeping an accurate logbook is not difficult but it needs to be ready to back up these claims. A logbook needs to contain the odometer reading at the beginning of the tax period and at the end, with each business trip logged by date, destination, purpose and number of kilometres travelled.
“Don’t claim for business-related travel if you don’t have a logbook – SARS will almost certainly want to see it,” Retief says.
Business versus pleasure
Another important area of focus should be the proper recognition of genuine business expenses relating to secondary sources of income, such as rental property, says Retief. For example, a detailed bond statement is needed to ensure that only interest and administrative expenses are claimed – capital repayment, by contrast, is not claimable. In addition, if repairs and levies are being claimed, supporting paperwork must be on hand in case of enquiry.
Another important tip for individual taxpayers is to check that the information with which SARS has prepopulated their tax returns on e-filing is accurate. Banks, medical aids, employers and so on will have been submitting all the relevant information to SARS during April and May. Inaccuracies that come to light if an audit is done could make it seem like the taxpayer has been acting fraudulently.
Something that can easily slip under the radar is interest earned from the savings portion of comprehensive medical aid schemes, or even interest earned from SARS on late repayments.
To make sure that all sources of income have been identified, Retief advises taxpayers to go through all their bank statements for the year. All income shown on the statements should either be reflected on the tax return or, if it’s not taxable income (a loan repayment, for example), the taxpayer should note its provenance. It is easy to forget this type of information in two or three years’ time, as Retief points out.
“South Africans tend to leave everything to the last minute but this year, let’s buck the trend and avoid the last-minute panic,” Retief advises.
“One final thing to remember: all tax practitioners need to be registered with SARS, which means being members of one of the recognised controlling bodies like SAIPA,” he adds. “Make sure your tax practitioner is legitimate.”