Provident Fund deductions

Don’t you think it’s great that we now have Provident Funds as a deductible expense in our tax returns?

Just a heads-up though, for those of you who haven’t yet filed your tax returns.  The employee portion as indicated on the IRP5 under code 4003 is the full amount paid – it is the total of both the employers portion and the employees portion.  This is the amount you use when working out your tax payable.  Do NOT add codes 4003 and 4473 together.  And don’t expect to receive a tax certificate – Provident Funds are run like Pension Funds and are only detailed on your IRP5.  Only the Retirement Annuity Funds provide a certificate.  Using the wrong figures can provide quite a surprise to the taxpayer on assessment, and not a good one.

There are only three months left to file your tax returns.  Give me a call if you need help in getting your return in to SARS.

All the best as we head out of winter and into Spring.  Keep warm and dose up on whatever colds and flu protector you and your family take; this flu is particularly aggressive.

JENN

Is the Medical Deduction getting you down?

Do you feel you pay through your nose for medical bills and can’t see a light at the end of the medical tunnel?  There is good news for you.

Our tax system has kindly allowed us to claim an additional Medical Tax Credit in our returns if we have had a rotten year and ended up having to fork out a fortune for medical bills over and above our medical aid contributions.  In addition, SARS have allowed for a Medical Disability or Impairment to further increase this additional tax credit in our returns which results in a greater credit against the tax you’ve paid for the year, provided of course someone in your family qualifies.

“Well, Jenn,” you ask, “how do I or my family member qualify?”

It’s pretty simple really.

You have to firstly look at the SARS definition of disability.  What they say is that in order to be deemed disabled you have to have a sever limitation on your ability to function or perform daily activities.  This can be due to a physical, sensory, communication, intellectual or mental disability.  This impairment has to have lasted more than one year and be diagnosed by a registered medical practitioner who is a specialist in the field that your disability relates to.

Once it is established that you or a family member has a disability as defined, and your doctor has signed off on this fact by completing the ITR-DD form (which can get from me if you leave a comment below this post) you can calculate the additional medical tax credit which will further reduce the amount of tax you’re to pay for the period.

The normal calculation involves adding all your contributions to a medical aid, to all your additional expenses not covered by medical aid, and then applying a formula involving your annual medical tax credits to produce a balance.  This balance is then subjected to another formula involving your taxable income, and 25% of the leftover balance can then be claimed as an additional medical tax credit.  You can appreciate that once these formula’s have been applied not many people qualify for the additional medical tax credit.

What the disability rules do is dramatically reduce the ‘red tape’ stifling the medical calculation so that you can utilise 33.3% of your medical balance after the first formula is imposed, without a whole host of additional formula’s and hoops to jump through.  This can make a considerable difference to whether you owe tax or could expect a refund.

If you have some form of chronic illness I would strongly suggest you approach your doctor for a Disability Declaration so that you can at least benefit from it.

It’s not all bad news for those without a disability though.  If you are over the age of 65 the same rules apply to you, and you are able to claim back more of your medical bills than the whipper-snappers of 63!!

If you’d like clarity on medical disability deductions or medical deductions for persons over the age of 65, please leave a comment below and I’ll assist in any way I can.

If you’d like a copy of the Disability Declaration form, please leave your name and email address and I’ll forward you a copy.

Kind regards,

Jenn

 

Tax proposals on foreign income

There’s been a whole lot of hype about how foreign income will be taxed in this country in 2019.

Some people are even choosing to come back home to work now, because there is no financial benefit to being away from their families for so long any more.

What has been proposed is that the taxable income needs to be declared here in South Africa, and the tax calculated accordingly, with any taxes already paid in the foreign country being allowed as a deduction, with the balance outstanding (in the case where the tax rate in the foreign country is more favourable than ours) being considered a debt due to the state.

This could be a bit disastrous, depending on how you see it.  I look at the foreign income that, although not taxed here, is certainly spent here.  That could be lost on a large scale.  And another problem could be that we would have a massive exit of residents choosing to emigrate to the country they are employed in.  On the other hand, of course, SARS are saying that most of the people benefiting from the current s10(1)(o)(ii) exemption are not paying tax in the other country anyway as they’re not deemed resident there, so why not claim the tax and boost our infrastructure accordingly.

The public are allowed to comment on the proposal.  If this affects you it is advisable that you do.