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There is no
prohibition in South African tax
law on minimizing your tax
payable. The principle is
actually well part of our common
law. We have a section enacted
in our Income Tax Act that deals
with transactions that are
solely entered into for the
purposes of tax evasion.
However, SARS has lost a couple
of cases on when applying this
section, as tax saving plans
often passes a business or
substance test and tax avoidance
is your legal right.
Proper tax
planning is not something that
one can really do when you
submit your tax return. People
who really save a lot of tax are
those that consider the tax
consequences of every
transaction or investment they
make. It is a continuing process
and the help of a knowledgeable
tax advisor can really save you
money.
Here are some tax tips to
consider:
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Income
splitting:
The husband earns a large salary
and the wife effectively
nothing. All investment income
that goes to the husband is
taxed, after some exemptions, at
40%. There are legitimate means
of letting the wife earn all
income and therefore make her
use her tax exempt threshold
completely and thereafter
starting to pay tax, after using
her own exemptions, tax at 18%.
Donations:
Few people make use of the
annual amount exempt from
donations tax. Over years this
reduced your estate
significantly and also lessens
your taxable income. The amount
is currently R100,000 per
taxpayer and where husband and
wife uses this together to
transfer wealth to children, we
can start talking serious
savings after a couple of years.
Capital gains
tax exclusion:
The annual amount of capital
gains that is exempt per person
per year is R15,000. This is
available to every taxpayer and
people should use this even if
it means buying and selling some
shares to realize the gain. It
starts costing one money when
you sell all your shares after
five years and make a R50,000
gain. After the R15,000
exclusion and with a 40% tax
rate, you will end up paying
R4,000 tax that is completely
unnecessary.
Tax
compliance:
It pays to have your tax returns
correctly and completely
submitted every year. For some
reason South Africans like
telling about they get away with
not paying tax. Many are caught
as SARS has become a much more
professional organization and
they are becoming more efficient
every year as their collection
targets increase. Many people
get caught and there is nothing
we can do to really help.
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Before relying on
any of the above planning, see
our terms of use and disclaimer
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