Highlights in this issue:

*** Earning less than R120,000 a year? Read this…
*** 1,500 taxpayers have already suffered from this problem - make sure you're not among them...
***Is your child on Ritalin? Get SARS to pay for it by doing this one simple thing...

From the pen of Karin Iten…

Dear Investment Academy Reader,

It’s that time of year again: Time to submit your tax return. There’s nothing worse. But the truth is, it’s really not as hard as it looks – if you do it right that is. That’s why this week I’ve put together a list of the most common tax return mistakes and how you can overcome them.

Tax mistake #1: Do you even need to do a tax return?
If you earn less than R120,000 annually and your salary structure doesn’t include benefits – travel allowances and retirement annuity benefits – you don’t have to submit a tax return. But you still need to register with SARS regardless of whether you have to pay or not.

Tax mistake #2: Don’t ignore that “RF incl” checkbox on your form
The RF indicator on the first page of your tax return is vital. On it, you’ll see the following question: Did you receive income that is reflected on an IRP5 or IT3(a) certificate? You’ll also notice that it asks separate questions about the type of income you earned. Now this is a little tricky: If you earned income on which your pension/provident fund contributions are based, you must tick the “Y” box. All other “non retirement funding income” must be ticked “N” as SARS uses this to determine the deduction allowed for retirement annuity fund contributions. (A 15% calculation is done on all amounts indicated as “N”.)

Tax mistake #3: Don’t forget to include ALL your income!
Ensure you declare all the income you received or accrued during the tax year. If you don’t, it could lead to an additional tax of up to 200%. Banks and other institutions regularly submit details of the interest paid or accrued to their clients – and SARS can tell from these records whether or not the income stated is accurate. Over 1,500 taxpayers suffer this penalty each year – make sure you aren’t one of them!

Don’t forget, if you received local or foreign interest income or dividends during the year, you’ll need to declare this. Just remember not to deduct the amount of tax-free investment income you’re entitled to. To make life easier for taxpayers, SARS’s does this calculation for you if you’re filing via eFiling.

Tax mistake #4: Only medical expenses actually paid by you are deductible
Although you can’t claim the contributions your employer pays to your medical fund, if you paid for any of the following yourself you can request a deduction:

•    Contributions to any medical aid scheme registered under the Medical Schemes Act;
•    Amounts not covered by your medical fund;
•    Medical expenses incurred and paid for outside South Africa;
•    Any expense incurred and paid in consequence of any physical disability suffered by you, your spouse, child or stepchild (e.g. special school fees).

Important announcement!

SARS recently updated its definition of the terms “physical disability” and “handicap”. And that means if you qualify, you’ll be able to claim even more tax deductions on your medical expenses. According to the revision, a disability is any impairment (physical or mental) that moderately to severely limits your ability to perform your day to day activities. (This includes depression, HIV/Aids and even Anorexia.) It also states that, you’ll be able to claim for any expenses relating to the disability – including medical (e.g. modifications to your car to make it wheelchair friendly) to non-medical expenses (like remedial school for a child with ADHD). To qualify, download an ITR DD form off the SARS website and take it to your doctor for confirmation.

Tax mistake #5: Calculating CGT incorrectly could result in unnecessary queries from the SARS
If you calculate the capital gains tax figure on your form incorrectly, SARS will request that you correct this figure. And that means you’ll be paying additional costs. You only need to declare:

*** The proceeds,
*** Base cost [this is the value at which you acquired the asset, plus the costs of improvements if you made any],
*** Exclusions
*** And the capital gain.

SARS will calculate the rest! And don’t forget, if you made a capital gain and are married in community of property, don’t split the gain. SARS will do this too.

Tax mistake #6: Keep a copy of your tax return
And finally always remember to keep a copy of your tax return, in particular the section regarding your travel expenses. Since the opening and closing odometer readings must correlate from year to year, you’ll need this when you complete your return the following tax year. If you eFiled last year, you can look up your closing kilometers from the year before by going to the “Income tax work page” and looking at your “return history”. And don’t forget, from this year on, you’ll need to keep a log-book of your business mileage to qualify for a deduction. You can download yours on the SARS website.

Bottom Line: No one looks forward to doing their tax return; but it needn’t be a costly trial and error process. If you know the mistakes that others often make, you can save yourself the time and money that they didn’t.

Here’s to your financial freedom,

Karin Iten
For the Investment Academy

The information in this email is confidential and may be legally privileged. It is intended solely for the addressee. Access to this email by anyone else is unauthorised. If you are not the intended recipient, any disclosure, copying, distribution or any action taken or omitted to be taken in reliance on it, is prohibited and may be unlawful. If you are not the intended recipient please return the message to the sender and delete it from your records. Alternatively, please contact Fleet Street Publications Pty Ltd on Customer Services 0861 114 365.