Your last chance to open a gap on the taxman
As February 28 approaches, there is still time for a few quick moves that will help you save on your tax payments, writes LEIGH ROBERTS
February 28 is a dreaded time for most people as the year closes and tax assessment looms. But as a smart taxpayer, you can use the next 12 days to get your affairs into their most tax-efficient state.
Salaried taxpayers, especially, should do their utmost to save on tax. These are the people who bear the heaviest part of the country's tax burden, as they are the softest target: their complaints are ignored and few escape the tight tax net.
Many salary earners who receive a car allowance from their employers - as compensation for using their private car for business travel - end up paying in after assessment.
This is because unless you have travelled many business miles during the year, or the costs of your car are very high, your tax deduction works out to be lower than your allowance. (In your return, you are fully taxed on the allowance but can claim a deduction for the cost of your business travel.)
Clocking up extra miles this week could slightly increase your tax deduction, especially if you did not keep a business travel log book during the year. If you didn't, you are obliged to use the taxman's formula for calculating your business miles - which means the first 14 000km of your total distance travelled is regarded as private, and what's left is business travel (but your total distance can't be more than 32 000km).
You may want to think about buying new car tyres in this tax year to increase the total costs of your car. But if you have an older or paid-up car, it may be more beneficial to use the taxman's deemed cost table rather than your actual costs.
Saving on your tax bill entails maximising the available deductions and allowances. Unfortunately, these are few to salary earners and mainly revolve around contributions to benefit funds like retirement annuity (RA), pension and provident funds.
Take a look at whether you should top up your contribution to your RA. Salary earners who are members of a pension or provident fund can deduct contributions up to the limit of the greater of three figures: R1 750; R3 500 less tax-deductible pension contributions; and 15% of non-pensionable earned income.
Broadly, this confusing term covers interest income, business profit, rental income and the portion of your salary excluded from your pension contribution calculations, such as fringe benefits and bonuses.
An RA is a tax-efficient investment, but it's worthwhile only if your money is in a high-performing insurance portfolio or suite of unit trust funds.
If you paid contributions into your RA fund last year, for which you did not receive a tax deduction, you can include them in your claim this year.
If you reinstated your RA policy this year, you can claim a deduction for up to R1 800 of your contributions (and carry the excess into next year's tax return).
The other main area of tax planning at this time of the year relates to the timing of income and expenses. The ideal is for you to defer taxable income to future tax years and to bring forward deductible expenses into the current tax year.
You will, however, need a tax consultant to advise you on whether this fancy footwork is possible (and this is unlikely for straight salary earners).
Upping your allowed expenses is another area for some last-minute tax planning. Professionals can deduct annual subscription fees: so pay up now rather than next month. The cost of technical books and magazines relating to your profession can also be deducted (books over three years).
If you receive a computer allowance from your employer, for using your home computer for business work, you can claim a tax deduction for your business cost (some wear and tear, and consumables). If your costs are low, it may be worth stocking up on consumables this week.
If you receive rental income, aim to incur as many deductible expenses in this tax year as possible since rental income is fully taxed (but don't go into a loss situation as this will be difficult to claim).