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Housekeeping before the end of the tax year on 28 February

I sometimes sit back and chuckle at ourselves … we seem to go into a frenzy towards the end of the year to get certain things done, and we
then lift our heads on the second of January and start the merry-go-round again!   What funny creatures we are!

What does come up quite early in the new year is the approach of the end of the tax season on 28 February.  For some people there are Rich Townsend Photography-0424certain decisions that need to be taken – you certainly do not want to wake up on 27 February and start panicking that these things have not been done. Let’s set the tone for the year and get organised early!

 What you need to give consideration to

  • Lump sum Retirement Annuity (RA) contribution
    If you have earned income during the year on which no pension or provident fund contributions have been made (for example, bonuses, commission, travel allowance, annuity income), you are entitled to contribute up to 15% of this amount into a Retirement Annuity, and to claim a tax deduction on this amount when you submit your annual tax return to SARS.A Retirement Annuity is a very tax favourable investment vehicle from the point of view that you are able to claim this tax deduction, and, in addition, you are removing the value of your contribution from your dutiable estate (that is, your assets on which estate duty is calculated should you die). Retirement fund monies such as Pension Funds, Provident Funds, Preservation Funds and RAs do not form part of your dutiable estate, and can be very effectively used as an estate planning tool.    Talk to your financial planner who can explain this to you in greater detail.
  • Annual donations
    Donations between spouses are tax-free. In addition, every taxpayer is entitled to donate up to R100,000 per annum to anybody they wish, say children or to your family trust.   Between a husband and wife they can therefore donate R100,000 each per annum (R200,000 in total), and remove these amounts from their personal estates.    However, it is essential to speak to your financial planner before going ahead and making these donations, to ensure that they do not adversely affect your financial plan.We are still awaiting to hear from the Finance Minister regarding any potential changes to trust legislation.   If any changes are made in his budget speech on 25 February, we will let you know.
  • Provisional tax – second payment for 2015 returns
    If you are a provisional taxpayer, your second return for 2015 is due by the 28 February. Again, don’t wait until 27 February before starting to calculate these figures.

You are exempt from provisional tax if you are:

  • Under the age of 65 years, and do not carry on your own business, and your taxable income does not exceed the tax threshold (R70 000), and your interest, foreign dividends and rental income do not exceed R20,000 per annum.
  • Over the age of 65 years, excluding directors of companies and members of CCs, and your taxable income does not exceed R120,000 per annum, provided that such income consists exclusively of remuneration, rental, interest or foreign dividends.

Contact your financial planner who will assist you with your annuity earnings or any interest or capital gains that have been earned in your investments during the tax year.   There is an interest exemption for every taxpayer as follows:

Persons under 65:                           R23,800
Persons 65 and older:                     R34,500
Therefore the first R23,800 or R34,500 of any interest earned during the tax year is not taxable, and only amounts over this must be added to your taxable income.

  • Capital gains calculations
    If you have triggered a capital gain during the 2015 tax year (from 1 March 2014 to 28 February 2015), this capital gain needs to be taken into account in your second provisional tax return.Every taxpayer is entitled to an annual exclusion of R30,000 on any capital gain made during the tax year, and one-third of the balance of the capital gain is then added to your taxable income. If you have a share portfolio, now is an ideal time if you wish to make any changes, offsetting losses against gains.If you have sold your private residence during the tax year, there is an annual exclusion of R2 million of any gain you may have made.   Note, though, that this exclusion does not refer to a holiday home or rental property, only your primary residence.There are other capital gains exemptions that are applicable to small businesses.  For further information on this, chat to your financial planner.

A great financial plan ensures that your money is invested in such a way as to take advantage of every concession – and this time of the year is the perfect time to make sure you do so.  Your planner is there to help you if you are unsure – do not hesitate to contact him or her … and make the most of your savings!

By |2017-07-11T12:21:22+00:00Jan 21, 2015|News|1 Comment

About the Author:

Pat is a certified Financial Planner. Pat’s personal experience in wanting peace of mind about her own financial affairs being in the best possible order, drove her to pursue a career in financial planning.The freedom that this gave her, prompted her to help individuals in the same situation.

One Comment

  1. Sonia la Fleur 6 February 2015 at 10:10 - Reply

    this is a very helpful article, Pat. There is still so much education regarding Financial Planning to be done for ordinary salaried workers. I’ve just completed the PG.Dip in Fin. Planning and am writing the Board exam next week. Now I need to get some hands-on experience 🙂
    My motivation for doing this was similar to yours – optimising my own financial affairs and that of my family..
    Keep up the good work, and let me know if I can help!
    Regards, Sonia

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