Tax payers warned: Don’t take chances

The 2013 Tax return season was launched yesterday with lots of warnings for tax payers to tread carefully, not take chances, because the consequences can be dire.

The 2013 tax return season was launched by Finance Minister Pravin Gordhan yesterday with an encouragement for taxpayers to embrace efiling in order to avoid long queues. The South African Revenue Services (SARS) declared yesterday that more than 11,238 tax returns had already been filed online.

Last year SARS recorded more than 5.66 million tax returns on deadline and had 1.4 million outstanding and about 98.86 million returns were submitted electronically. SARS highlighted the raising of the annual income threshold from R120 000 to R250 000 for the filing of income tax returns

SARS also warned taxpayers to be wary of criminals who use the tax season to take advantage of unsuspecting taxpayers. “Taxpayers must beware of emails that ask for personal, tax, banking and eFiling details (login credentials, passwords, pins, credit/debit card information, etc). SARS will never ask taxpayers for such information in an email. SARS will also not request banking details over the phone, or via email, SMS or websites”.

In line with many tax authorities across the world SARS has tightened its systems. Tony Barrett, a senior Wealth Advisory Relationship Manager at RMB Private Bank, said governments across the world are tightening tax collection measures to ensure compliance from taxpayers.

Barret said it is important to remember that tax law is the only law in the land where one is presumed guilty until proven otherwise. He said tax payers must ensure they disclose and provide accurate information when interacting with the SARS.

SARS can approach any financial institution requesting information for purposes of conducting an audit on an individual in the event that non-compliance is suspected.

According to Barrett, an increasing number of people mistakenly omit certain details when completing a tax return, especially where Capital Gains Tax (CGT) is concerned. CGT is a relatively new tax, only having been implemented in 2001, but it is only now with the appreciation in assets over the last 12 years that this tax is starting to get real teeth.

“It’s important to note that CGT affects anyone who owns an asset. If the asset has grown in value between the time of purchase and point of sale, CGT will apply to the capital gain. CGT is not applicable on items that are for personal use, such as clothes, a car or jewellery. For example, CGT will apply when one sells a second home that had been bought as an investment, a percentage of the profit made from sale of the asset will be taxed,” adds Barrett

Assets held offshore such as shares, property and investments are not treated any differently and must be declared to SARS for CGT purposes as profits made from selling offshore assets is taxed on two levels – the actual gain and the exchange rate gain made on current exchange rate movements over which the asset was held. South African tax residents are taxed on their world-wide income and capital gains even when the money was not repatriated back to South Africa.

Most important to understand about CGT is the base cost, the amount for which an asset was bought and the realisation value, which is the value of the asset upon being sold. Barrett says because of poor record keeping, people often provide SARS with wrong figures and this can cause unnecessary problems for taxpayers.

“SARS has developed into a highly efficient arm of government and taxpayers are warned not to be penny wise and pound foolish. If necessary, one should seek professional advice when completing a tax return as certain aspects of this process can be quite complex. This has made it all the more important to provide clear information on one’s return as vague details could have far reaching consequences. In the event where a statement of assets and liabilities are required the values must be disclosed at historical cost values and not current values” adds Barrett

 2013 Deadline Dates:

  • Tax Season 2013 starts from 1 July 2013.
  • The deadline for taxpayers, who submit their tax returns manually by post or by dropping them off in a SARS drop box, is 27 September 2013.
  • The deadline for all non-provisional taxpayers is 22 November 2013. Non-provisional taxpayers are the majority of employed individuals who submit a tax return and who earn an income from one or more employer
  • The deadline for Provisional taxpayers is 31 January 2014. Provisional taxpayers form a much smaller segment of the tax base and are those individuals with other forms of income like investment income, income from business activities, rental income, royalties income or directors of companies

 Who must submit an income tax return?

Any taxpayer whose gross income is above R250 000 per year

Any taxpayer whose gross income above R250 000 per year needs not file a tax return if they meet the following criteria:

  • they only earn one salary from one employer (i.e. they only have one IRP5);
  • they do not have any other form of income (e.g. interest or rental income) and
  • they need not claim deductions such as medical expenses, retirement annuities or travel expenses.

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