9 Tips for Paying Less Individual Tax

I. Join a Medical Aid Scheme

If you contribute to a Medical Aid, you receive a fixed monthly tax credit which is a direct reduction of your tax liability. As the primary member, you receive this rebate for you and your dependents under that Medical Aid Scheme. It’s worth noting that if your credit is greater than your tax liability, then your tax liability will be reduced to zero and you will not receive a tax refund.

II. Donate to a SARS registered charity (PBO)

Contributions to a registered Public Benefit Organization (PBO) are tax deductible up to a limit of 10% of your taxable income. This tax deduction does not apply to just any donations, but to donations towards a PBO, which is a non-profit organization approved by SARS to not pay taxes on the donations it receives. Any donations exceeding the 10% limit are carried forward and can be claimed as a deduction in the following tax year.

III. Contribute towards a retirement fund

Contributing towards a pension or provident or retirement annuity (RA) fund is a great way to reduce your tax liability, while also saving for your future. SARS allows a tax deduction of your contributions up to a limit of 27,5% of the greater of your taxable income, or remuneration to a maximum of R350,000 per year. Pension and provident fund contributions are usually structured via an employer, but this does not preclude you from topping up to a RA fund.

IV. Open a Tax-Free Savings Account

Tax payers are taxed on all returns (capital gains earned, dividends, interest received, etc.) from savings or investment accounts. However, if you open or own a tax-free savings accounts offered by financial institutions, your returns or growth on your investment will be tax free up to an annual contribution limit of R36,000 per tax year, as well as a lifetime limit of R500,000.

V. Keep a logbook to record business mileage (travel allowance recipients)

Some employers give a travel allowance to employees who travel frequently (for business purposes). A travel allowance is a taxable fringe benefit. The assumption is that you drive 80% for personal and 20% for business, therefore, 80% of the travel allowance is included for tax purposes. If however, you keep a logbook to record your business mileage when you travel for business, you can claim a travel deduction against it to reduce your tax liability.

VI. Keep a logbook if you drive a company car

Employees who use employer provided cars will be taxed on it as it is a taxable fringe benefit included with their taxable income. If however, you keep a logbook to record your business mileage, you can claim a travel deduction which could reduce your taxable liability.

VII. Claim business travel or commission related expenses (commission earners)

If you earn commission and your commission income makes up more than 50% of your total remuneration, you are allowed to deduct all your business-related travel against your commission income, provided you keep a log book to record all of your business travel.

You can also deduct all your commission related expenses against your commission income if you incurred them in order to earn your commission. It is recommended to keep records of supporting documents for your expenses so you can claim them come tax season.

VIII. Claim your daily costs if you receive a subsistence allowance

You can claim for expenses against a taxable subsistence allowance for local and foreign travel paid by your employer (for work). You can claim either the SARS approved deemed daily rate, or your actual daily costs for meals and incidentals, e.g., private phone calls, tips, room service, etc. If you choose the deemed rate, you don’t need to produce proof of what you have spent, but you do if you choose to claim actual costs.

What is the SARS deemed daily rate?

SARS has a set deemed rate for meals and incidental costs for local travel, applicable per night the employee spends away from home. They also have a fixed daily amount for business travel outside of South Africa, which varies from country to country. It’s worth noting that if the allowance received is less than the SARS deemed rate, the deduction claimed will be limited to the actual allowance received.

IX. Claim expenses if you earn non-salary income 

If you are self-employed, you can deduct all your business-related expenses against your business income. It is advisable to keep a record of supporting documents for the expenses incurred.

Need tax planning and tax strategy assistance? 

Contact us any time. At B-Advisory, we focus on capturing value by strategically planning around your core financial objectives to optimize your tax position. We have proven record in assisting our clients with complicated tax matters and resolving their tax disputes with SARS.

For more information about us, visit our website at https://www.b-advisory.co.za/

“The hardest thing to understand in the world is the tax income.” – Albert Einstein