MD’s Top Tax Savings Tips ahead of the Budget on 24th February

With the upcoming Budget on 24th February 2021 and the current economic climate (SARS will try to find every possible way to increase collections!), we are expecting a tough Budget and increased taxes.

The following comprehensive year-end tax planning guidance and “tax-saving tips” can help you to minimise your tax burden and protect your wealth. Please contact us urgently to maximise these opportunities. We also look forward to hosting you at our Section 12J webinar on Friday 12^th February:

Maximise Your Wealth Planning and Save Tax

1. Donations: 

• Donations made during your lifetime do not form part of your personal estate on death.  

• Annual donations made by you up to R100,000 are exempt from donations tax – 

• • If you and your spouse each donate R100,000 per tax year to your Family Trust your combined estate will be reduced by R1 million over a 5 year period. This translates to an estate duty saving of R200 000 – R250 000, depending on the size of your estate.
  • Donations to SARS registered charities (Section 18A PBO) are tax-deductible up to a limit of 10% of your taxable income. Any excess may be carried forward to the next tax year.
  • Should the donation be used to fund an asset purchase, this may result in other tax implications which need to be considered. 

And you can achieve an even greater exemption benefit from the new deemed donation rules contained in Section 7C if your Trust or a company in which you or your Trust owns more than 20% of the shares, owes you more than R2 200 000.

To take advantage of this tax-saving opportunity before 28 February, contact us urgently to ensure that the correct process is followed.

     2. Tax-Free Savings Accounts: 

All taxpayers are eligible to make an annual contribution limited to R36 000.  This is in addition to the annual tax-free interest allowance for individual taxpayers.

This investment will be exempt from income tax on Interest, Dividends Tax and Capital Gains Tax.

This is an important aspect of every person’s wealth planning so please discuss it with us and your investment advisor. 

     3.  Retirement Planning: 

Retirement Annuity Fund Contributions should be maximised – all pension, retirement annuity funds and provident funds are limited to 27.5% of all taxable income.

• The contribution deduction will be capped at R350 000 per tax year.

Top-up your retirement savings now and let SARS fund your retirement!

     4.  Investment Planning: 

The main features of the highly tax-efficient Section 12J (S12J) investments include:

• Up-front (100%) tax relief
• There is no recoupment if the investment is held for at least 5 years
• CGT would be payable when the investment is liquidated

This is a maximum 45% tax saving now with a potential CGT liability of 18% (at the current rates) after 5 years.

The REAL saving is 27% (for an individual) together with growth in the investment.

This is a highly attractive and effective tax-saving and wealth-generating investment Certain minimum investment contributions and periods would apply but it is fund-dependent (limited to R2.5m per individual p.a.).

Should you be interested in this structure, we need to complete the process ASAP as some funds would need contributions to reflect in their accounts by mid–February to ensure processing of the contributions before the end of the 2021 tax year.

     5.  Review your Capital Gains Tax (CGT) and pay less tax:

• Do you intend selling any personal investments before 28 February? 

• Have you had transactions that triggered CGT already this year? 

• Did they exceed the annual exemption of R40 000? 

• Would the broker’s fees on selling CGT loss assets that offset the taxable gain be more than the increase in base cost should you re-purchase the investment the next day?

You could save R 7 200 per annum in tax before the cost of brokerage on the sale and repurchase of your investments that would otherwise be lost. Contact us urgently to plan your CGT. 

     6.  Do you, as the shareholder or as a person connected to the shareholder owe monies to any of your entities that have accumulated profits?

Contact us to discuss the most tax-efficient structure to avoid deemed dividends and unproductive interest claims from SARS. 

   7.  Enterprise Development (including Supplier Development) and Socio-Economic Development Contributions:

Your company must make its enterprise development, supplier development and socio-economic contributions by 28 February to maximise your entity’s B-BBEE ratings for the year if:

• The entity has a February year-end
• Turnover exceeds R10m
• Less than 51% of the shares are owned by black shareholders 

For simple convenience and to maximise your ED and SED contributions contact, CSI Link, at amanda@csilink.co.za

Maximise Your Remuneration Planning and Save Tax 

1. Changing lives – education bursaries for your employees:

The cost of education is high, it is also the greatest gift one can give.

Help relieve some of the financial stress of your employees – with education bursaries for them or their family members, you can make a real difference and achieve tax savings.

• Certain requirements and conditions apply (new regulation stipulates that there should be no element of salary sacrifice involved where family members)

Contact us to see how you can assist your employees.

     2.  Maximise your company car or travel allowance with a detailed logbook:

If you have received a travel allowance or have driven a company car during the 2021 tax year, you need to record your mileage reading as at 28 February 2021.

It is compulsory for taxpayers who receive a travel allowance (or who drive company cars) and who wish to claim their business mileage deduction, to keep a logbook of their business mileage.

The daily logbook entry should include:

• The date
• Odometer reading for business and private travel
• Purpose of the trip/client’s name
• Opening and closing odometer readings for each tax year (and preferably per day) MUST be noted

SARS has become very strict about logbooks and the required layout. If you do not comply you could forfeit the benefit of these allowances and owe money to SARS on assessment.

     3.  Medical aid and deductions:

Expenses which were incurred and paid for directly by you (out-of-pocket expenses) can also be submitted to SARS, provided the actual slips and proof of payment accompany the tax return.

SARS will disallow claims not substantiated with the required proof.

Contact us urgently should any of your children require additional or specialised medical care, whether temporary or permanent in nature. You could be benefitting from additional tax relief.

     4.  Retirement Planning: 

Retirement Annuity Fund Contributions should be maximised – all pension, retirement annuity funds and provident funds are limited to 27.5% of all taxable income.

• The contribution deduction will be capped at R350 000 per tax year.

Top-up your retirement savings now and let SARS fund your retirement.

     5.  Outsourced payroll services: 

With the ongoing changes in tax legislation and enhanced scrutiny by SARS, we can save you the administration headache of compliance by reducing your risk of payroll validations. 

You have already seen how important employee payroll compliance was during the TERS relief process!

Our extensive experience in outsourced payroll services ensures that we work with you to maximise your tax and payroll efficiencies and ensure that all your compliance requirements have been met.

Contact us now before we roll over into another tax year.

The above is all part of extremely complex legislation, which is continuously evolving and subject to many rules. We would strongly urge you to talk to Alexis, Dave, Juanita, Fatima or Danie before you take any action.