Tweaks to help make your filing easier this year…and save some tax!

“Time sure flies when you’re having fun”, so the old saying goes.

The other day I was listening to Footloose being played over our local movie complex’s PA system, and it dawned on me that this Kenny Loggins classic will be 40 years old this year!

It also struck me that we are not only at the beginning of another year (which also happens to be a leap year), but that despite us having only fairly recently filed our 2023 tax returns, the end of the 2024 tax year is drawing near.

Since the beginning of a new calendar year is a good time to take stock, here are four quick tips for giving your tax affairs a good ‘tune-up’.

Paperwork

Most of us hate paperwork, and as a result, we put this off until there is a crisis—like when SARS sends you one of those “please submit supporting documentation” letters after you have e-filed your return.

Since SARS requires you to keep such documentation for five years after such return has been assessed, it’s a good idea to start a filing system where you can keep these documents year-by-year.

Given that this is 2024, it’s about time that you started keeping these records electronically. The easiest way to start an electronic filing system is to open a sub-folder within your documents folder marked ‘tax’, and further sub-folders for each year.

Records that you should keep include IRP5 and IT3 certificates, medical expenses, contributions to retirement funds, and any other relevant vouchers on which you may have claimed a deduction (e.g. expenses against rental property, approved donations, etc.)—many of which will have probably been e-mailed to you.

You should also include copies of past returns and assessments—these can be downloaded from e-filing.

Justifying travelling expenses

For a number of years now, taxpayers seeking to deduct business travel have been required to keep a logbook.  Although the tax return still asks whether such a logbook has been kept, SARS’ rule is no logbook, no claim allowable.

However, logbooks need not be complex. Publishers of logbooks (including SARS) make provision for both business and private travel, which creates the impression that you need to record every trip you ever make, irrespective of whether it’s to see a client or to drop Johnny off at school.

I would argue that this is not necessary—since you can only claim the cost of business travel against your allowance, trade, or commission income, I can’t see why SARS would have any interest whatsoever in your private travel.

For years now I have recorded only my business trips, together with the odometer readings at the end of each year. This means that, for example, if your opening odometer reading is 15 426 km and your closing reading is 33 774 km, your total travel for the year is 18 348 km.

If your business travel, as per your logbook, for the year totals 11 590 km, your private travel would therefore be 6 758 km. The business portion, which can be claimed, would therefore be based on 11 590 / 18 348 of your total travel expense.

However, SARS requires a fair amount of detail relating to your business travel, including the person/organisation visited and the reason for your trip.

Also, bear in mind that travel between home and your office is regarded as private travel.

Topping up your retirement fund

If you have not done so already, now is a good time to top up your retirement fund contributions—after all, having too much pension is a problem that most retirees can live with. What’s more, SARS chips in at your marginal tax rate provided that you stay within certain limits.

SARS no longer differentiates between pension, provident, and retirement annuity (RA) funds, and effectively lumps all your retirement fund contributions together to determine the amount that is allowable as a deduction.

If your employer also makes retirement fund contributions on your behalf, these will be treated as a taxable benefit on your IRP5 certificate. However, both employer and member contributions are considered for deduction, which means that the treatment of employer contributions is tax-neutral in the majority of cases.

The deductible amount is based on 27.5% of remuneration for PAYE purposes or taxable income (before taking the retirement fund contributions and lump sum payments), capped at R350 000 per annum.

Any contributions exceeding the allowable deductions are carried over until the following tax year, and any deductions that have not been deducted at retirement will be paid out tax-free if taken as part of a lump sum.

Contributions to TFSAs, and charitable donations

You may contribute up to R36 000 per annum to a Tax-Free Savings Account (TFSA), subject to a lifetime contribution limit of R500 000. While such contributions are not tax-deductible, any earnings or capital growth on such contributions are completely tax-free.

Also, if you are feeling charitable, donations to certain recognised Public Benefit Organisations (PBOs) are deductible up to 10% of your taxable income. To claim the deduction, the PBO concerned must be in the position to issue a receipt that complies with Section 18A of the Income Tax Act.

With effect from the 2023 tax year, PBOs issuing Section 18A receipts are required to upload these to SARS

WRITTEN BY STEVEN JONES

Steven Jones is a registered SARS tax practitioner, a practising member of the South African Institute of Professional Accountants, and the editor of Personal Finance and Tax Breaks.

While every reasonable effort is taken to ensure the accuracy and soundness of the contents of this publication, neither the writers of the articles nor the publisher will bear any responsibility for the consequences of any actions based on information or recommendations contained herein. Our material is for informational purposes.