Here are five smart ways (or loopholes) you probably never thought of that could see you saving money on tax:
Increasing retirement annuities (RAs)
Up to 27.5% of taxable income, limit R350 000 per year, can be deducted from your income regarding annuity contributions deducted before February 28.
Giving to the family trust
Apparently, a taxpayer can make donations of an amount not exceeding R100 000 per year which will not incur donations tax. You and your spouse can make such donations into the trust and must be done prior to February 28.
Distribute trust income
Trust income can be distributed to beneficiaries and they would be taxed on the income at a lower tax rate lower than that of the trust. It is worth your while then to ensure that the trust income is distributed during the tax year.
It should be of general consensus, naturally, of what portion of the trust income can be made available for distribution. The matter should be discussed thoroughly with each beneficiary and such a decision recorded in the trust deed.
Using a tax-free investment account
The government introduced a tax-free investment product to get South Africans to save after-tax money. The terms are as such – R30 000 can be invested per year – or up to R500 000 over your lifetime), free of dividend tax, income tax on interest and capital gains tax.
Capital gains Tax (CGT) exemption
You can have an annual exclusion of R40 000 on any CGT earned during the tax year. Certain growth assets (for example, unit trusts) can be sold before year-end and re-purchased shortly after. You can thus make use of the annual exclusion and up the base cost of your portfolio. By doing this, the calculated CGT on disposal of assets is reduced.
If you have a small business, you should investigate additional ways of saving money on tax. Small businesses qualify for several exemptions from Sars, dependent on size and annual turnover. You could be exempt from paying the Skills Development Levy which was created for training of employees.
You should record all business expenses that you incur, regardless of their value. SARS lists deductions for many types of expenses which you may not have thought you could claim for.
Also investigate these tips
There are other tax savings tips which you should investigate. For instance, we all receive an interest exemption annually which should be exhausted on the more stable, interest-bearing investments. You can then use the tax-free savings account for dividend-yielding investments.
Did you also know that interest paid on a loan for an investment property is fully tax deductible? If you’re in the top-end tax bracket paying 41% on each rand of marginal income earned, you can claim a tax deduction of 41% on each rand of interest paid.
Probably those with tax consultants, and especially those with small businesses or have many investments will be aware of all tax deductibles, but if you’re a newcomer to this group, you could be pleasantly surprised.
You could be doing yourself a great disservice by not making use of a tax professional either in a private or in-company capacity. There are many smart ways that you could be saving a lot of money on tax that you unaware of. It’s time to invest in a tax expert today!