Author: Charmaine Prout

New legislation on Estate Tax

Charm_TaxMost people find taxes very complicated. Albert Einstein said it himself: The hardest thing in the world to understand is the income tax.

Don’t be intimidated at all! Keep in mind that my team at Chartered Tax is here to help. We certainly don’t expect you to study all the tax implications, especially the new Tax laws relating to Estates, as we are here to support you through your journey.

We are, however, experiencing some delays in the process of winding up Deceased Estates, and wanted to share some of the most significant changes implemented in March 2016. These may help to guide your conversations with your Legacy & Trust Specialists during your Estate Planning meetings.

Here is a short summary of the new Tax laws on Deceased Estates:

Income Tax

Prior to the changes in legislation, post-death income was taxable in the hands of the beneficiary. The new legislation states that for deaths after 1 March 2016, income is taxable in a new entity referred to as a Deceased Estate. Put simply, after the date of death, the Deceased Estate comes into existence, and is liable for tax.
There are, however, exceptions to this rule: for example, the assets accrued to the surviving spouse on the death of the first dying spouse are not deemed to have been disposed of on the death of the deceased, and taxes are not payable at this point.

Value Added Tax (VAT)
If the deceased was registered as a VAT vendor, the Executor may have to register the estate for VAT purposes and there may be VAT implications.

Estate Taxes
With the Estate now seen as a separate Income Tax entity, any income accrued before death and additional income to the Estate, whether through acquisitions or disposal of assets, after the date of death, is now taxable.

Capital Gains Tax (CGT)
Capital Gains Tax is payable by the Estate. This payment is due before the inheritance is transferred to the beneficiaries. Beneficiaries only become liable for capital gain or loss once the asset inherited is sold or disposed of.

While all this may seem very complicated, remember that your Retiremeant™, Tax, and Legacy & Trust Specialists will guide you every step of the way. To assist us in winding up Estates more timeously, here are a few tips to keep in mind:

1.We are here to help. While we ensure that Estate taxes are taken care of and SARS requirements are met, we will also make you aware of what the Capital Gains Tax and Estate duties are likely to be. We plan to ensure that the Estate has enough liquidity.
2.Remember to file your Tax returns annually, and if you are married, this applies to both spouses.
3.Keep your Tax Clearance Certificates in a safe and accessible place. Having up-to-date Tax returns and Certificates speeds up the winding up Estate process.
4.Discuss any other entities that should be tax compliant with your Planning Specialist; for example, your business, a company that you may be a shareholder or director of, a Trust that you may be beneficiary or trustee of.
Taxes aren’t as intimidating as you think! It’s just a matter of incorporating these conversations into your Retiremeant™ planning process. Added to that, a good dash of administration and filing goes a long way!

Charmaine

We hope that you enjoy the new format of The Beacon, which will be appearing four times a year, and replaces the monthly Reporting from the Helm, and The Journey. Our in-house services – Invest, Tax, and Legacy & Trust – are represented, in addition to our RetiremeantTM and Wealth Creation teams.

 

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Tax return filing

If filling in a tax return were an easy task, the South African Revenue Service (SARS) would not have a page dedicated to ‘How to complete your income tax return’.

When in doubt, turn to a professional for advice, but in the meantime here are some tips for a smooth tax return submission:

Income versus salary

Ensure that you include all your sources of income:

  • Interest that you have earned on your investments

Don’t be tempted to omit this. All financial institutions complete an IT3(b) certificate, from which SARS learns what interest you have earned in the year of assessment. You will face penalties for any omissions.

  • Income from renting out a property, such as a holiday home
  • Income from a trust

Expenses

Home office expenses

SARS is scrutinising home office expenses, and random site visits are not unheard of.

To calculate office expenses accurately, the following formula is recommended:
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Medical expenses

Simply uploading your medical aid tax certificate is not sufficient for the claim for out-of-pocket expenses. SARS carefully looks for the proof of payment for qualifying medical expenses paid out of the taxpayer’s own pocket; so, for SARS to allow the deduction, a medical invoice must be submitted with a proof of payment.

Travel allowances

When it comes to claiming a travel allowance, it is not unusual for SARS to request more information, in addition to a taxpayer’s log book.

Glitches and errors

Should you forget to upload all the necessary documents, an additional assessment will be raised, and you could find yourself owing SARS money. Have all your supporting documents ready before you complete and submit your ITR12 tax return.

Filing taxes can be a complicated matter, and SARS recognises that taxpayers may make genuine errors when submitting their tax form. Deal with errors in the following ways:

  • Request for correction: Use this form if you have made an error or omission on your return, or if you believe SARS has captured your information incorrectly.
  • Notice of objection: Use this form when your information has been captured correctly, but you disagree with your assessment outcome. This must be done within the (TAA) prescription period: 30 days from date of assessment.

For more details on this, consult the SARS guide.

To start your own tax filing, visit the official Tax Season 2018 for Individuals page on the SARS website.

If doing your taxes on your own is too daunting, consider using a tax practitioner – they may save you time, money and stress. The SARS call centre is not always the best route to go.

Enhancing the client experience

Take a moment to imagine your stereotypical tax practitioner: possibly a grey suit, conservative manner and serious expression, meant to communicate a disciplined approach to life. Then, take Charmaine Prout, Managing Director of Chartered Tax – outspoken, flamboyantly stylish, always with a sparkle somewhere (mostly on her nails!).

But don’t be fooled. Beneath this unconventional exterior resides a very savvy businesswoman, one who, in a very short period of time, has brought tremendous value to our Chartered Wealth Solutions clients.

It’s a family matter

“My son-in-law, Devlin Ross, has worked at Chartered Employee Benefits for six years. He had been urging me to engage with Chartered Wealth Solutions regarding my personal financial planning. In the process, it became clear that my tax business and Chartered would be a great match,” explains Charmaine.

“Within this business are three generations, and they extend the family caring to their clients.”

Together with her family, Charmaine had established her tax and accounting practice 35 years ago, and her clients include a range of businesses and individuals: restaurant-owners, doctors and dentists, garages, swim-schools, car dealers, farms, emergency medical services … spanning locations from Gauteng to Nelspruit to Cape Town.

Within this company are three generations: Charmaine’s mother, Lucy Groenenstein, manages reception and administrative tasks, bringing a motherly warmth and welcome to the office; Lucy Nel, Senior Bookkeeper, is Charmaine’s sister, and also, according to Charmaine, her anchor and her sage; Charmaine’s daughter, Tannith Ross, started her High School teaching career in Maths and Science, and is now also a Senior Bookkeeper and Junior Tax Consultant; Janine Urwin recently joined the company as General Assistant and Charmaine’s PA.

Their Office Assistant, Siphilisiwe Ncube, has become a member of the family, so long has she been working for them. The relationships within the family are reflected in the caring service that they extend to their clients.

Each brings an attention to detail and commitment to serving their clients with excellent service and extensive expertise. “We have up-to-date tax knowledge and vast experience with a variety of clients,” Charmaine comments, “and Chartered clients had been asking for tax services as part of their financial planning.” And the rest, as the cliche runs, is history.

Chartered Family focus

Working with clients from Chartered Wealth Solutions has resulted in mutual benefit for both planners and tax practitioners. “Imagine how much more holistic planning can be with knowledge from both a financial planning and a tax perspective,” says Charmaine. “We go through their financial affairs for a second time, from a tax perspective, and this often facilitates a client’s greater understanding of their own Retiremeant™ plan. We help bring order to their finances.”

The serious implication of not having up-to-date tax affairs becomes obvious in Estate Planning. The new tax legislation requires you to have all your tax affairs in order before an Estate can be wound up, and this can cause mammoth delays and administrative wrangles. “Now we are working with Chartered Legacy & Trust, rather than having to rely on a variety of different legal companies. We meet once a week with Kerryn and her team, and so have shortened the process for our clients considerably,” adds Charmaine.

She also loves the fact that clients are being empowered to understand their own tax. “A client received a large inheritance, and, suddenly had to register for tax – daunting but we took her through the process step-by-step.”

The reason why we are such a natural fit with the Chartered Family,” concludes Charmaine, “is that we share values, with the end goal of serving the client with excellence.” Clients have appreciated the service offered by Chartered Tax. You can read the testimonials from appreciative clients in this newsletter.

Connect with Chartered

Telephone: +27 11 502 2800
Fax: +27 11 502 2812

Email: info@charteredwealth.co.za

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