The top tax tips you really want to remember

Acting chief executive at the Office of the Tax Ombud, Gert van Heerden, says tax is a very emotive issue and often by the time complaints reach the ombud, the consumer is already very frustrated.

Here’s what you need to know:

1. Sars can appoint third parties to recover money from you

The Tax Administration Act allows the South African Revenue Service (Sars) to issue third party appointments to employers, banks and other parties to recover money that you owe the taxman. However, before this happens, Sars must send you a final letter of demand and then issue a letter of appointment to the third party.

“Often taxpayers tell us they didn’t know about it or didn’t receive a final demand and only became aware when there was a deduction from their pay slip or their bank account,” says Van Heerden. However, he points out that if you use eFiling, Sars can post a final demand on your eFiling profile and that serves as a legal notice.

Note that third party appointments are not limited to banks and employers but any third party that is giving you money. For example, your mother or your spouse can be commissioned by Sars to pay over money on your behalf. Sars has the right to ask your bank to share your bank statements to interrogate where you are receiving funds from. “This is international best practice,” Van Heerden explains.

A starting point to avoid this situation is that you should not ignore any communications from Sars. Also, ensure that your contact details are updated, particularly if you have changed tax practitioners or are no longer using a tax practitioner.

2. Make note of time frames for tax objections

There are legally prescribed time frames within which you can file a tax dispute. James Coutinho, senior manager for group corporate and client tax at Liberty, says taxpayers don’t often question their assessments after they have filed their tax returns.

“You not only have the right to request a correction but also have the right to lodge an objection to the assessment if you are not happy with [it]. This can be done electronically via Sars eFiling,” he says.

“Ideally, the moment an assessment is raised and you don’t agree, you should file a dispute,” says Van Heerden.

He adds that most people are either unaware of the time frames or their tax practitioner fails to file the dispute on time. For example, you can file an objection within 30 days that will have a maximum time frame of three years. If the time frame lapses, you must make an application to go to tax court.

“Tax court is not free and will cost you money,” says Van Heerden. “While you can represent yourself, it is advisable to use a lawyer as there are very specific timelines and procedures that you must observe in tax court. The longer the delay before you object, the more serious your case is expected to be.”

Van Heerden notes that you can request an extension if you are filing an objection, but you must motivate for the time extension, and you need to show cause why it should be granted.

Once the three-year cap for lodging an objection has passed, you lose all rights to dispute that tax assessment.

3. Make use of the ‘Calculate’ tool

Coutinho notes that the ‘Calculate’ tool on eFiling is useful because it shows you what tax you can expect to pay on assessment. “If you’re not expecting to pay more tax or receive a big refund, the tool will give you a chance to ensure you have completed your return correctly before you file it,” he says.

4. Submitting your supporting documents

When filing your return, or in some cases once you have done so, you may be required to submit supporting documents. If you are using eFiling, the size limit on documents that can be uploaded is 5MB. “If you have more documents than that, which is often the case, it is advisable to go into a Sars office with your documents so they can be scanned and returned to you. Or you can make copies of all the documentation and have it delivered to a Sars office,” says Van Heerden.

5. You may need to keep your supporting documents for longer than five years

While it is well known that you need to keep any supporting documents for five years for tax purposes, Van Heerden points out that there are two scenarios where Sars can request documents going back more than five years:

• If you file your tax return late, the five-year period only starts when you file that return. If, for example, you file your 2018 tax return in 2020, the five-year period will expire in 2025 and not 2023.

• If you have no documentation, you can enter an “agreed assessment” where Sars examines the information you are able to provide. This is an audited process that Sars undertakes.

6. Double-check your pre-populated information

Sars eFiling pre-populates the information from your IRP5, medical aid and retirement annuity tax certificates on your tax returns. “Taxpayers often forget to check whether the pre-populated information on their tax return corresponds to the tax certificates issued to them by their employers or financial institutions,” says Coutinho.

“It often helps to ‘refresh’ your tax return by clicking on the ‘Refresh Data’ button,” he adds.

However, if that doesn’t happen and there are discrepancies, you should contact your employer or financial institutions before you submit your return so that all the relevant information can be updated by Sars on the eFiling system.

He says one of the more common mistakes is to overlook the number of medical aid dependents pre-populated on a tax return, which could result in the taxpayer losing out on medical tax credits they are entitled to.

7. Changes to tax exemption for foreign employment income

“The most contentious tax change from last year is probably the change to the tax exemption for foreign employment income,” Coutinho says.

From March 1 this year, South African tax residents who spend more than 183 days in employment outside South Africa will be subject to tax in South Africa on remuneration exceeding R1 million.

Read: Tax D-Day looms for South African expats

“This change has a significant impact on South African tax residents working abroad and expatriates who have not financially emigrated,” says Coutinho.

Read: Checklist: Things to do before the end of the tax year