How To Avoid Tax In South Africa
It goes without saying that the rising cost of living will continue to rise. Food, fuel, interest rates, inflation, and other factors all work together to make life as expensive as possible in South Africa.
Financial advisor at Momentum Leonie O’ Connell asserts that even in a bleak economic climate, there are strategies to minimize taxes.
“A growing number of South Africans are turning to tax refunds and tax cuts as a means of easing the stifling pressure of a recovering economy. If you know how to correctly package your returns and organize your portfolio, there are ways and means to recover some of your tax contributions.
Long-Term Planning For Retirement Savings
Retirement planning and tax planning are both possible at the same time. Make sure you are contributing to a retirement savings vehicle each month.
The ability to deduct your investment in a retirement annuity from your taxable income is a major advantage, according to O’ Connell.
For instance, if your annual income is around R500,000, your effective tax rate is roughly 25%. In other words, for every R100 you invest in your retirement annuity, only R75 comes out of your pocket since, if you claim it back, you get R25 back from the taxman.
In a tax year, you can deduct no more than R350,000, or a maximum of 27.5% of your taxable income.
Allow Your Health Insurance To Make A Tax Contribution
A medical scheme contribution tax credit was implemented by the South African Revenue Service (SARS) in 2012. Your contributions are subtracted from your overall tax liability, or the total amount of tax you owe.
It applies to the fees paid by a taxpayer to a registered medical scheme for you (the taxpayer) and your dependent(s). SARS refers to this rebate as the “Medical Schemes Fees Tax Credit.”
For the year 2022, the credit is a set monthly sum of R332 for you as the primary member, R332 more for your first dependent, and R224 more for each additional dependent.
Giving Is Tax Deductible
Giving to others is undoubtedly a noble act, but it doesn’t hurt to receive a small reward in return. You are permitted to give up to 10% of your taxable income to a charity, according to Section 18A of the Income Tax Act.
O’Connell advises making sure the Public Benefit Organization has a Section 18A certificate if you want to make a deduction claim.
These are the organizations that have received official recognition from SARS’ Tax Exemption Unit. You can declare your donation in your tax return and anticipate receiving a portion of it back if all the necessary paperwork is signed as verification, according to O’Connell.
Having An Office At Home
If you worked from home at any point during the previous tax year, even if you are a permanent employee of the company, you should be entitled to claim your expenditures. According to SARS, if you are an employee who works from home and have designated a room to be used for “trade,” you may be able to write off some of the costs associated with keeping a home office.
O’Connell stated that there were some restrictions attached to this. “Your office needs to be set up for business purposes in a designated area of your house. More than half of your duties had to have been carried out in this home office.To be eligible for this return, earners must conduct more than 50% of their activities outside of an office supplied by their employer, especially if more than 50% of their compensation is made up of commissions or variable payments depending on performance.
