Wednesday , June 26 2019
Home / africa / How to get Sars the money back

How to get Sars the money back



December holidays came and gone and I was lucky to be able to spend some time with the family on the coast. So the holidays you've forgotten for a long time is important to wait some time for the budget for the year ahead, and hopefully you have enough money for the next relaxing December holiday at the end of 2019.

In these politically and economically unstable times, when opposition parties in Parliament agreed that former President Jacob Zuma – among other things – "to repay money", you can save some money by taking advantage of some tax disputes offered by the South African Revenue Service (Sars). When I get Sars to "pay the money," the win is twofold: you and I are trying to increase our savings and pay a smaller tax.

Just like you, I pay my taxes diligently, though sometimes in my breathing told a few traditions. However, when I can legally save some tax either by lowering my tax or by completely reversing some taxable income, I see it as a victory. Any amount you can invest is added in the long run, so if you can only postpone the extra R200 a month, please do so. Then you will have more money than you do nothing.

There are investment products that offer you tax benefits, so Sars can really give you money.

Caveat Emptor: I have been involved in property management for 16 years and have found that investing only in tax benefits is likely to lead to disappointment. So before getting into the details of the investment offers, let me say that you should always first consider the merits of the investment product itself and then assess the tax benefits if they exist.

Interest-free Savings Accounts (TFSA)

The reason for introducing the TFSA was to stimulate household savings. This may reduce the vulnerability of some households to unexpected spending, which in turn leads to an increase in debt.

Increasing household savings contributes to increasing the overall level of savings in the economy, financing higher fixed investment levels and supporting growth prospects.

TFSA provides tax benefits so that any increase in savings regardless of source – income, capital or dividends – is exempt from tax and subsequent withdrawals are exempt from tax.

The product offers a wide range of investment opportunities, from local money to offshore. The annual contribution limit is R33,000 with a lifetime limit of R500,000. However, it is the subject of a tax on survivors' property.

Earlier arrivals are better when it comes to launching the TFSA as long-term investment will benefit from the compound effect of duty free growth.

Pension Retirement (RA)

The second tax-friendly investment product is RA. RAs received more than their fair share of bad press. This is, however, unreasonable for linked RAs that can increase the value of your investment portfolio.

One RA is simply an individual pension fund – which can be held beside an employers' fund – which allows people who are not part of a group scheme or who want additional savings to benefit from the retirement fund benefits.

From the point of view of tax benefits, these contributions are tax deductible up to 350,000 RU per year or 27,5% higher pay or taxable income, including any taxable capital gain, but before deducting donors.

If you can afford contributing, say, R50,000 a year and having an average tax rate of 30% you will save R15,000 a year in taxes. You can contribute R50,000 but physically invest R65,000 if you re-invest your tax refund from your RA contribution.

All growth, regardless of source – income, capital or dividends – is tax-free. There are no contractual reasons for real estate or death executions. However, in the Prudential Investment Guidelines, it is not possible to invest more than 75% in equity and more than 30% in offshore.

Many financial commentators claim that limited exposure at sea rejects all the tax benefits of this product. However, I believe that these investments on the high seas, and even any other investment, must compensate for the tax deduction of your contributions and risk-free growth.

The second warning comment of such commentators is that after retirement you will receive income tax you earn from the RA and therefore you would be better off in events where only CGT and withholding tax dividends are lower than the marginal rate of income tax. Again, I wanted to be different. If you look at the difference in value, for example in the stock portfolio and in the RA over 25 years – taking into account the deductibility contribution and its reinvestment, as well as the tax exemption – the (composition of savings) more than replacing the income from the retirement pension subject to tax income.

I hope that after you have read the message, you are determined to cut the RA unless you have it yet. However, it is important to have a balance between discretionary and non-discretionary savings in the portfolio to create different tax and liquidity profiles.

Investments in Chapter 12J

Investments in section 12J have been in place since 2009, when the South African Government introduced changes to the Income Tax Act to stimulate the private sector and the economy.

These changes introduced tax incentives for investors – natural persons, trusts or small business – through tax deductible investments in venture capital companies in Chapter 12J. Section 12J must be licensed at the Financial Services Authority (formerly the Board of Financial Services) and registered with Sars.

While contributions to the investment in section 12J are useful for people with higher incomes, much of the support for this sector comes from investors who want to reduce the effect of CGT.

Clearly, this is an investment category where you need to pay close attention to basic investment, investment strategy and compliance with issuers before you are too amused about possible tax savings.

From the point of view of tax relief, you can make unlimited contributions deductible from taxable income. Do not connect too much because the post is deducted before the RA tax calculation and you can not get the full tax advantage from your RA contribution. You have to stay invested for at least five years, otherwise it will save your Sars tax relief. Upon completion, your primary costs will be considered as zero when determining CGT.

Whether to pay less taxes (when earning the same income) or to get a tax back, I have more money than I did not do. You have until the end of February to invest, so you will get it immediately – there is no time to get rid of your money!


Source link