A tax return is the completion of documentation that calculates an entity’s or individual’s income earned with the amount of tax payable to the South African government, government organizations or to potential taxpayers.
Specific tax forms can be used by taxpayers, or private entities that are required to report information on the tax liabilities together with income earners, businesses, and companies.
Taxation is one of the biggest governmental sources of income. There are two types of taxes—direct and indirect—which are both parts of the tax revenue. Tax revenue is the income of government gained from taxes that are levied on income, profit, goods and services, land revenue, ownership, and transfer of property, and other taxes. It shows how effectively and to what extent the government manages the resources of the economy. Citizens in Sweden, Denmark, Finland, and Iceland pay the highest taxes. Aside from the Nordic countries, Austria, the Netherlands, and Belgium also have high taxes. In contrast, countries such as Saudi Arabia, Brunei, Monaco, the Cayman Islands, Bahamas, and Andorra are so-called tax havens. These countries either have very low taxes, or none at all.
If you earn under R350 000 for a full year from one employer (total salary income before tax) and have no other sources of additional income (for example, interest or rental income) and no deductions that you want to claim (for example medical expenses, travel or retirement annuities), then you don’t need to submit a return.
If you are not sure whether you need to submit a tax return, SARS can help you find out whether you need to submit a tax return or not.
Tax season: Navigating your 2021 / 2022 tax returns
Not everyone who has earned an income in the current tax year needs to file a tax return.
Sars has announced that their filing season will run from July 1 to November 23 for individual taxpayers, with taxpayers being encouraged to file online. Provisional taxpayers, including trusts, will have until January 31 2022 to file via eFiling or the MobiApp. Because of the rise in the third Covid-19 wave of infections, Sars has temporarily closed its physical branches with the intention to re-open them on August 16 2021, although this is subject to review. However, the temporary closure of its branches will not affect those who file via eFiling or through the Sars MobiApp.
Determining whether you need to submit a tax return
Not everyone who has earned an income in the current tax year needs to file a tax return. This is because, as an individual, you were only liable to pay tax if your taxable income was more than the tax thresholds, which for the March 2020 to February 2021 period were as follows:
R83 100 for individuals younger than age 65;
R128 650 for individuals older than 65, but younger than 75;
R143 850 for individuals aged 75 and older.
Further, if all of the following criteria apply to you, you do not need to submit a tax return:
Your total pre-tax salary for the year was not more than R500 000 and employees’ tax has been deducted or withheld in terms of the deduction tables, and
You only received employment income for the full year of assessment from a single employer, and
You have no car allowance, company car, travel allowance, interest income or rental income, and
You are not claiming tax related deductions.
If you are a South African tax resident and have earned above the tax threshold, you will need to file a tax return if you have had more than one employer or income source during the tax year. For instance, if you are formally employed and earn a rental income from an investment property, you will be required to file returns. Also, if you changed employers during the course of the tax year, this will qualify as two different income streams and you will be required to file a return.
In certain circumstances, you may be required to file a tax return regardless of whether your taxable income exceeded the tax threshold or not. For instance, if you carried on a business in or outside of South Africa, sold assets and the capital gain was more than R40 000 for the tax year, or where you owned foreign currency or assets exceeding R250 000 at any time during the tax year, you will be required to submit tax returns.
If you are unsure whether you need to submit an ITR12, it’s best to follow these guidelines issued by Sars, Do you need to submit a tax return?, which set out nine questions relating to your income during the year of assessment.
Preparing for your filing
If you have not yet received your IRP5 or IT3(a)s and other tax certificates, such as your medical aid certificate or retirement annuity certificate, you should contact your employer and/or service providers to obtain these as soon as possible. Other documentation that you will require to complete your submission includes the following:
Certificates received for local interest income, foreign interest income, and foreign dividend income. Remember, if you are married in community of property, the certificates received by both you and your spouse are required.
Proof of qualifying expenses from your medical scheme for the period March 1 2020 to February 28 2021.
A logbook to claim business travel deductions where you receive a travel allowance or a fringe benefit from an employer-provided vehicle.
All information pertaining to both local and foreign capital gain transactions.
Documents and receipts for commission-related expenditure.
All information relating to the letting of assets.
All information relating to income that must be declared or deductions that must be claimed.
As a taxpayer, you have the choice of filing your returns via the eFiling site, the MobiApp, or in person. However, with the temporary closure of the Sars offices, filing in person will not be possible until at least mid-August. If you choose to file via eFiling or the MobiApp, Sars agents are available to assist you telephonically.
The MobiApp has recently been enhanced to include additional services which can be accessed with or without data or airtime, and these include the ability to request an eBooking appointment, confirmation request to determine whether to submit a tax return, the issuing of a Tax Registration Number, and requesting a statement of appointment.
Those taxpayers who cannot file online or through the app can do so physically through a Sars branch, but this will take place by appointment only. Taxpayers have been advised not to arrive at a Sars branch until further notice. To make an appointment with Sars, you can send an SMS to request a booking or call the Sars Contact Centre on 0800 00 7277.
In order to expedite the eFiling process, Sars will be actioning auto-assessments on around 3 million taxpayers. To do this, Sars uses data received from employers, medical schemes, financial institutions, retirement annuity funds and other third-party data providers. If you have been selected for auto-assessment, you will receive an SMS notification from Sars to this effect. Upon the collection of data, Sars will complete an auto-assessment which will be pre-loaded against the taxpayer’s profile. If you are happy with the outcome of the auto-assessment, you can accept it online which means that you no longer need to file a tax return because Sars has effectively done this for you.
If you are due a refund, Sars will pay the refund to you as per normal, as long as Sars has your correct bank details on record. If you owe Sars money, you can make payment as per the normal process on eFiling, via EFT or the MobiApp. Before accepting your auto-assessment, be sure to check that all the prepopulated third-party information displays correctly on your tax return before you accept your auto-assessment.
If you are not happy with the auto-assessment, online functionality allows you to edit your returns. If you have additional deductions to claim, such as rental income, excess medical expenses, or home office deductions that have not been pre-populated, you need to enter these online. Remember, the onus is on you to ensure that the information declared is accurate, and not fully declaring all your income can result in non-compliance penalties.
Claiming for home office expenses
If you work from home and have a dedicated room from which you work, you may be allowed to deduct certain home office expenses for tax purposes, with these being calculated on a pro-rata basis. In order to qualify, the room must be used regularly and exclusively for your ‘trade’ or employment and must be appropriately equipped for the purposes of your trade, for example, it must include a desk, computer, printer, or whatever you need to adequately conduct your trade.
If you are remunerated by salary, you must perform more than 50% of your duties in your home office. You can also qualify for a tax deduction where more than 50% of your remuneration is made up of commission or variable payments based on your work performance and where more than 50% of those duties are performed outside of your employer’s premises.
When applying for a deduction, you will be required to provide proof that your employer permitted you to work from home. If you earn a salary but the majority of your time is spent on the road, visiting clients or at other locations, you will not qualify for a deduction. Home office expenditure in this context refers to the rental, costs of repairs, and expenses in connection with the premises including phones, internet, stationery, cleaning and office equipment. Home offices expenses are calculated on a pro-rata basis using the square meterage of your home office versus the total square meterage of your home using a pre-determined formula.
Importantly, keep in mind that when a taxpayer claims home office expenses in respect of a primary residence, the capital gains tax exemption that applies on the sale of the property falls away in respect of the gain attributable to the portion of the property used as a home office. If part of the primary residence has been used as a home office, then the primary residence exclusion of R2 million must be apportioned for the non-residential use.