Dear fellow taxpayer,

Welcome to this week’s bulletin.

As you may already know, Finance Minister Trevor Manuel announced in his budget speech that the deemed kilometre system is being scrapped next year.

This means that from the 2010/11 tax year, you won’t be able to use the deemed kilometre system when completing your travel calculation on your tax return.

What does this mean for you?

If you haven’t got an up to date logbook, you’ll have to forfeit the benefits of an allowance and will be taxed fully on your travel allowance!

Although this change only applies from the tax year starting on 1 March 2010, it would be a very good idea to get into the habit of keeping a logbook now! This will ensure that by the time next year comes around, you will be a logbook pro and the tax benefits of your travel allowance will be secure.

Mailbox

Answered by Matsika Vengesa of Tax Consulting SA

Do the new withdrawal rules apply to my RA?

Dear Matsika,

I recently read the following advice in a print publication:

“Did you know that if you're under 55 years old and wait until March 2009 before cashing out one of your retirement funds, you can save hundreds of thousands of rands? As of the 1 March 2009, a new bill will come into effect that could give you a tax exemption on the first R22 500 you withdraw”.

My understanding is that RA funds are only available over the age of 55 unless the amount is R7 000 or less? Has this rule now been changed?

Answer:

The rules haven’t changed for RAs. Only if the value of the full benefit in the RA is less than R7 000 can you withdraw the amount before attaining 55 years of age.

Until next week.
 
Regards
 
Nothando Hlatshwayo

Managing Editor
The Practical Tax Handbook