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Tax deductibles
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Optimising Tax Deductibles: Natural Persons Tax

With the taxation season knocking at our door once again, you may have that heavy feeling descending on your shoulders. As much as you may dislike doing it, failing to file your tax returns can get you into serious trouble. The law does not make exceptions for being overwhelmed or stressed.

It’s always worthwhile to get your financial affairs in order. Who knows? Maybe the South African Revenue Services (SARS) owes you.

The point is you can make it through your tax season and capitalise on certain benefits. Here is a guide on how to optimise your tax deductibles.

Overview on natural person’s taxes

Tax time on scrabble blocks with clock in the middle

Taxes that are levied by the national government of South Africa under the Income Tax Act 58 of 1962 are as follows:

  • Natural persons tax (also known as normal tax) income tax

The below taxes form part of a natural person’s tax:

  • PAYE
  • Provisional tax
  • Withholding tax on royalties
  • Donations tax
  • Dividends tax

For this post, we will be focusing on tax returns and deductions. If you would like to know more about the various types of tax laws, read this guide on taxation in South Africa.

Deductibles to remember

Big TAX on chalk board with lady on computer

If you want to optimise your tax deductibles here are the crucial points to keep in mind for your tax return this year.

Contribution to a pension, provident, and retirement annuity fund

Investing in your future will always has a beneficial return. This does not only relate to your retirement, but also to your monthly contributions into pension, provident and retirement annuity funds.

Yes, these contributions are tax deductible. Although these are subject to an annual limit of R350 000 and a maximum of 27.5% of your gross earnings or taxable income (whichever is higher) within a tax year.

Medical aid contributors

Medical aids in South Africa can be costly, which makes receiving back from the medical insurance industry a relief. Here is the good news…

If you belong to a medical aid scheme, as the primary member of the medical aid you qualify for a medical tax credit at the value of R310. Not only do you qualify for it, but your first dependent receives the same tax credit value.

There is also a further credit of R209 for each member that is registered on your medical aid.

Donations for registered Public Benefit Organisations (PBO)

A group of people talking about the tax season

If you donate a sum of 10% of your taxable income to a Public Benefit Organisation (PBO), you can also claim a tax deduction.

However, it is not as simple as just claiming back tax. The PBO must be registered with SARS and grant a valid tax certificate for your contribution.

Travel allowances

If your employer pays you travel allowances, you can receive returns from SARS. Ensure you keep a detailed trip logbook with the related costs. If you do not have this proof, SARS can and will reject your claim.

This is an excellent deductible to keep in mind, especially if your work requires you to spend substantial time away from your loved ones. At least you get some money back in pocket for the time away from them and the added mileage.

Commission-related expenses

two people in business talking about tax

If you are in an industry where you earn commission on top of the basic salary, you may also be entitled to a deductible. This commission-based income is known as 3606 on the IRP5 form.

If the amount makes up for more than 50% of your total income, SARS will see that all costs incurred from making a living from the commission are deducted. Bear in mind that you will need to have evidence of this for SARS.

Business expenses (self-employed)

Self-employed business expenses are deductibles that talk to independent contractors, freelancers, and sole proprietors. If you have stationery, a phone or even employee costs, SARS will allow you to deduct these expenses related to making your income.

You must be thorough when it comes to keeping invoices and records of these expenses. At the end of the day, you want to see some money in your pocket and it will pay off if you follow procedures.

Tax-free investment accounts

Couple talking to a professional about tax

The government introduced tax-free savings accounts to encourage South Africans to save more money. With the tax-free accounts, investors can save R36 000 annually, with the lifetime limit of R500 000.

This gives you the advantage of the compounding interest dividends. You also don’t have to pay capital gains tax.

The dividends received by a person, whether you are a South African citizen or not, are normally exempted if these are South African resident companies.

Final thoughts on optimising tax deductibles

tax planning for this season

Getting the most out of your tax returns can benefit you for a lifetime. Understanding the financial system does not just benefit your pocket, It gives you the financial knowledge you need in order to work with SARS to your benefit.

If you feel you are lacking in knowledge and want to learn more, ask. Your money is a valuable asset that needs to be managed with care and consideration.

If you’re not sure where to turn, contact us at Maysure Financial Services. We will assist you to optimise your tax deductibles and continue on your road to financial freedom.

+27 11 839 2302

Maysure Financial Services is a registered financial services provider. FSP 15173