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We all pay tax. There really is no escaping it. However, there are things you can do to pay less tax and they’re all perfectly legal. Here’s five ways to ensure you hand over less money to the taxman:
1. Open a tax-free savings account
You can open a tax-free savings account through most reputable financial institutions, such as your bank – Absa, Nedbank, FNB, Capitec and Nedbank.
You can deposit any amount up to R36,000 a year (this could change) and a lifetime limit of R500,000 applies. If you exceed this threshold at any stage then the excess will be subject to 40% tax, according to Standard Bank.
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Online digital tax assistant, TaxTim, says that the difference between a TFSA and a conventional savings account is that all returns, such as interest, dividends, capital gains will be tax free. The growth from the savings is tax free and so are any withdrawals from this account.
As with most accounts rates and fees do apply so make sure you compare them – most banks will publish these online.
2. Donate to a charity
You can donate money to a Public Benefit Organisation (PBO). This is a non-profit organisation which has been given special approval by the South African Revenue Service (SARS) not to pay any tax on the dentations it gets from the public or from other donors.
SARS lists all its approved PBOs here. Just type in the name of the charity you wish to support, and you can verify if it’s registered with SARS.
TaxTim says your contributions to a registered PBO are tax deductible up to a limit of 10% of your taxable income.
3. Pay into a pension pot
According to TaxTim, contributions to a retirement funds are tax deductible up to a limit of 27.5% of the of the greater of your taxable income or remuneration (to a maximum of R350,000 a year). TaxTim says: “This limit applies to the total contributions you make to any pension, provident or retirement annuity (RA) fund during the year. The tax deduction will always be limited to the actual contributions you made.”
Liezl Alberts, tax specialist at Allan Gray, adds: “If you’re a member of a retirement fund, it’s important that there’s an accurate record of your retirement fund contributions so that when you withdraw the funds and SARS has to perform the required tax calculation, any excess contribution can be claimed as a tax-free benefit.”
4. Contribute to a medical scheme
A Medical Scheme Fees Tax Credit (MTC) is a rebate which is not refundable but will also reduce the amount of tax you pay. To claim this rebate, you need to pay fees and belong to a registered medical scheme
This credit must be taken into account by the employer when calculating employees’ tax, says SARS, but MTCs can be claimed by submission on an annual income tax return if a person is self-employed or a pensioner.
5. Remember to claim expenses
If you’re self-employed you can deduct your business-related expenses (telephone costs, rent, stationery, etc.) against the income that you generate from the business. But SARS will need proof of this so remember to keep a record of all your expenses and all the receipts associated with them.
