Tax Season is open…..does that mean you have to file a tax return?

[for prior posts see link at end of “about the author”]

The newspapers have spoken a lot about our new tax Commissioner’s comments about people not having to submit tax returns if they earned less than R500 000 in the tax year ended 28 February 2019. This has unfortunately led to a lot of confusion with many people thinking that if their taxable income is less than R500 000 they automatically needn’t submit a tax return. THIS IS NOT THE CASE.

So what were the comments referring to?

Every year a Government Gazette (GG) is issued which spell out exactly who does and who doesn’t have to submit a tax return. This year’s GG was issued on 28 June 2019 and very clearly states that the reference to R500 000 applies only where a natural person (you i.e. not a company or trust etc- different rules apply to these and they are not dealt with here) has received remuneration (salaries and wages) from one single source (one employer or one pension fund for the whole tax year ) and employees’ tax has been withheld in terms of the SARS PAYE deduction tables. In addition, it states that even if these criteria are fulfilled you must still submit a tax return if you received a general travel allowance (i.e. that you must justify with a log book) or a subsistence allowance or any other taxable fringe benefit, or some or all of your remuneration was from outside South Africa.

If you do satisfy this R500 000 one employer requirement you could still qualify to not to submit a tax return if you have also have received South African interest from a “tax-free” investment account and also interest (other than interest from a tax-free investment) which is less than:
(i) R23 800 if you are below the age of 65 years;or
(ii) R34 500 if you are aged 65 years or older;

However, If you did satisfy all these criteria you need to think carefully about whether you are happy not to submit a return. Remember that if you don’t you can’t be paid a refund. What if you had medical aid costs that you paid yourself or medical expenses that qualify for the medical fees credit or an additional medical expenses credit (see last week’s post)? If you don’t submit a tax return with these reflected on it you won’t be able to benefit from the relevant credit and wont receive a refund of tax paid.

But let’s say you receive less than R500 000 taxable income for the year but now know that the R500 000 tax return submission exclusion does not apply, do you definitely have to submit a return? The answer is: Not necessarily.

Unless SARS has told you that you must submit a tax return, provided it doesn’t include any trading income or offshore income (and you don’t have offshore assets with a value more than R225 000) you don’t need to submit a return if you were under the age of 65 on 28 February 2019 and your gross income was less than R78 150; or you were 65 years or older (but under the age of 75) on that date and your gross income was less than R121 000; or you were 75 years or older on that date and your gross income was less than R135 300. “Gross income” is all income but would not include interest which is from a tax-free investment account or below the limits indicated above (R23 800 or R34 500) i.e, you can receive these as well. So, provided these amounts are below the stated limits you would not need to submit a tax return or have any tax payable.

By way of example, let’s say you are 40 and received salary from 2 employers during the year to 28 February 2019, R28000 from the first and R35000 from the second (i.e. a total less than R78 150) and no tax was deducted by them. You also earned interest on a normal South African investment account of R15000 (i.e. less than R23 800) and from a tax free investment of R500 and a capital gain from sale of share you inherited of R20000 (i.e. less than R40000). You have no offshore assets or income. Even though you received the salary from more than one employer (i.e the R500 000 exclusion doesn’t apply) you still don’t need to submit a tax return.

Just remember, though, that if you have paid any tax, though, you may qualify for a refund and would need to submit a return to get it back.

The message: Be careful to ensure you really do qualify not to submit a tax return if you think you don’t Penalties can be payable if you get this wrong). And make sure you don’t want to submit (i.e. won’t be giving up a refund) even if you do qualify not to.

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