Know Your Money with Bronwyn Waner and Craig Finch
Know Your Money with Bronwyn Waner and Craig Finch
144. Navigating SARS Auto-Assessments: What You Need to Know
Navigating tax season doesn't have to be intimidating. In this enlightening conversation with Sue from Anthurico Accountants, we demystify the increasingly automated South African tax system and equip you with practical knowledge to confidently manage your tax obligations.
Sue breaks down the SARS' auto-assessment system, explaining how it automatically compiles third-party information from employers, banks, medical aids, and retirement annuity providers to simplify filing for those with straightforward financial situations. We explore who benefits from this system and importantly, who should still file manually – particularly those with rental income, commission earnings, car allowances, or investment returns. The message is clear: while auto-assessments offer convenience, verifying their accuracy remains your responsibility.
The conversation takes an interesting turn when we discuss property transactions, now firmly in SARS' spotlight through title deed tracking. Learn the crucial distinction between primary residences (which benefit from a R2 million exemption on capital gains) and investment properties (which receive no such exemption). We also venture into the complex territory of family financial transfers, unpacking the R100,000 annual tax-free donation limit, the unlimited spousal donation benefit, and the strict requirements for family loans to avoid being reclassified as donations. Throughout, Sue emphasises the importance of proper documentation and transparency – your best allies in navigating South Africa's tax landscape with confidence.
Have questions about your unique tax situation? This episode provides the foundation you need to make informed decisions this tax season.
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www.growthfp.co.za
Hello everybody, Welcome to Know your Money. I'm Bronwyn Wehner.
Speaker 2:And I'm Craig Finch, and we are from Growth Financial Planning. We hope you enjoy our podcast. Welcome everybody. Sue, nice to see you in the studio, thank you. Sue's got a company called Anthorico Accountants Is that the right word? Yes, and you help people with tax and businesses with tax and accounting services. As tax season starts pretty soon, sue, we thought, and ends on the 20th of October, we thought it would be a good idea to have you in the studio and help our clients get ready for tax season, and I think from all of us we get scared when you hear oh, my word, it's that time of the year. Why do I have to get ready? How do I start? So, from your perspective, what do you need to tell us? Getting ready for individual tax season and submitting a return. Welcome to the studio.
Speaker 3:Thank you. Well, sar's done mostly auto assessments for the last seven days. So as a tax practitioner I've seen hundreds of them come through. They are automatically done by SARs. It's done on all third-party information they've received. So whether it's an RIP5, a certificate from the bank, from medical aid, from your RA, anything like that, it's all picked up from that and auto-assessment is done because you've got a standard amount of income and it works on that standard amount of income and that it worked on that From auto assessment.
Speaker 3:If you're not, have a look at it. If you're not happy with it, then I would say we've got time to file a new one. So you just go in and you select the return like normal and you've completed as you would under normal circumstances. If you haven't received an auto assessment, you have to file your return as like normal and normally it is. If you got rental income, commission, car allowance, um, investments, that kind of thing, you won't receive an auto assessment. Then you would have to get your own done your own way and to do this it's the same reports as normal.
Speaker 3:But I would say to everybody please make sure you've got proof. The biggest thing is because Sol's going to say they could say I'm going to audit and then that you've got to give them proof of what you've declared. And then also, another thing that you need to declare is also the sale of property. It's become a big thing now. Sol's picks it up from title deeds. So if you haven't declared it, they will come back to you later and say it up from title deeds. So if you haven't declared it, they will come back to you later and say you haven't declared it. Let us know.
Speaker 3:And I think the biggest drive is because SARS does not know if that property belongs to you or it belongs to you and your wife, for example, because then it's split two ways or it's a second home or an investment property, and then of course the treatment is different. In your original home you get the $2 million exemption for your profit. If it's an investment property or a second home, you get ZIP. So you take the base cards and your proceeds. The difference between the two is actually taxable. So that's where SALS is actually looking. But the biggest thing on individuals I'd say please make sure you've got proof, because if sales orders give them everything, you can give them.
Speaker 2:And Sue, what happens if you sell a motor vehicle? Is that property? No, Okay, you're talking about property or home. A home, a house, and that will generate potentially capital gains tax.
Speaker 1:Correct A house a house and that will generate potentially capital gains tax Correct A house a business. Yes, yes, so you were saying auto-assessment and the medical aid and you know the things from the bank. Do they automatically get that? Yes, so you don't have to necessarily find that, but if they ordered you, would you have to send all of that?
Speaker 3:Sometimes what happens is if you haven't received an auto-assessment and you only have a salary, medical aid and a RA, you file it because you haven't received one. But then you say your medical aid is a different figure to what they say, then you need to have proof, because they've received already, from Discovery or whoever you have, your medical aid with what the amount is. So they need to know exactly what the amount is that you claim. For example, you know on your medical aid they will say the medical aid covers X amount. And then you get another column that says not covered by your medical aid. You can claim those. So then you'd have to prove it, you'd have to send them the certificate.
Speaker 2:If they've auto-assessed you, does that mean you've got your own login with SARS?
Speaker 3:No.
Speaker 2:You don't have to have a login. No, okay.
Speaker 3:If you haven't had your own login and you've just been leaving it for the last couple of years and you get a notification to say you have an auto-assessment, if you want to see it, then you need to register with SARS on that eMobi app or on the computer version e-filing and then you get your return from that.
Speaker 2:But if the auto-assessment comes through and says you've been auto-assessed, you don't owe, or you do owe and you just pay it, then it's the case closed. You don't have to worry about it.
Speaker 3:No, unless you want to check it. Sars always reckons that you should check it to make sure it is correct.
Speaker 2:But it must. Like me, I would be, but wary of Going into SARS and registering. I would just hope I'd do the right thing. So I'd rather come and see you and say, please will you do my return. That would be the better option.
Speaker 3:I have a lot of people who do come see me, but it's normally when it's not the average. So if you've got a medical aid, a salary and an RA, then people just normally leave the auto assessment because they know that's information SARS has got, or it's simple for them got, or they. It's simple for them they will do it. But when it comes to car allowance claiming, home expenses, capital gains, investments, all that kind of thing, then they will come see us and we will do it for them, because the more complicated it gets, the more you need to come up to date what you're allowed to claim and what you're not allowed to claim and if you have two retirement annuities, for example.
Speaker 3:That's fine, you can claim both. They both should be on.
Speaker 2:They both should be on, but you need to look that they're both on there.
Speaker 3:I would say you have to get into the return and have a look at it To have a look.
Speaker 4:Okay, so would you then file on people's behalf with SOS, and what sort of responsibility do you take on then legally, as you filed for them?
Speaker 3:Our responsibility is to file on the information we have received. But at the end of the day it's still the individual's responsibility to pay or to make sure that they've given us correct information, because sometimes what does happen you can see. As you imagine yourself. People don't want you to know about xyz. So let's say you've got you know an afternoon, an evening job, that you're working at a bar or whatever and you're earning another 50 000 around a month. You don't know to know um, you don't want sales to know, so you're not going to tell the practitioner. We don't know. We're not going to know unless there's an RIP5. And there are many companies that pay the individuals cash, so there is no RIP5.
Speaker 4:And how does it work with SARS and casual labour that's paid in cash?
Speaker 3:No, this works on that hourly rate where you I can't remember exactly, but I think it's 21 hours in a month. If they work more than 24, 21 hours in a month, you have to have them on as a regular employee, even if they work one week and they don't work. But legally speaking, you should reach to every single employee on your payroll and pay the money to SARS.
Speaker 2:And if you receive that money, you should and there was no RP5, you should tell SARS that you earned this money, Correct? I mean, I'm sure people don't, but that's what you should.
Speaker 3:They don't yes.
Speaker 2:Yeah, any extra cash that you earn, yeah yeah, yeah. What about donations to family members and that?
Speaker 3:You're allowed 100,000 a year, and if you do more than that, how would they know? The problem is, France has access to other people's bank accounts.
Speaker 2:Okay. So how did you receive this money? Yes, this person gave it to me. Okay, you owe the 100,000. Okay, right.
Speaker 1:And can family members like loan other family members Like, so say, I want to loan my child 3 million rand, is that allowed? Like how would I put that on my tax return and what would the child put on their tax?
Speaker 3:return A loan means they're going to pay their money back. Okay, so if there's a loan, you'd have to draw up a loan agreement to state that you give in the 3 million for this reason and then the person is paying it back and the conditions they're paying it back. So if your contract says they've got to pay 5,000 rand a month, you have to show that they're paying the 5 grand a month.
Speaker 3:If they're not paying the 5 grand, they take the 3 million. Two years later nothing happens. Then sales will deem it as a donation and you'll pay tax.
Speaker 1:Then you'll pay the donation tax and then with children like that, you wouldn't have to do interest on it, or would you?
Speaker 3:You're not compelled to, but remember, then it becomes a benefit. Okay, so if you're giving them the $3 million and say you're paying $5,000 a month forever but don't charge interest, the difference between what the interest should be and what was charged will be a benefit and they would be taxed on that benefit.
Speaker 2:So that loan can take many years to pay back.
Speaker 3:As long as there's an agreement.
Speaker 1:And then, sorry, one more question just on that. Now say, for example, they've paid a million and now I pass away and they still owe me two million. How would that reflect?
Speaker 3:It should be part of your estate, okay.
Speaker 2:And it still can be disposed of, and then yeah, but there could be tax implications. I would say that, oh, okay.
Speaker 1:Okay, just wondering. What are you doing with your children? Okay, just wondering.
Speaker 4:What are you doing with your children?
Speaker 1:No, there's often people that try to avoid donations tax and then they say I'm putting it down as a loan, I'm loaning this person and I'm just trying to educate people that if you do do that, you've got to charge the interest or the person does have to pay that back, because if you do over that and then you have to pay 20 donations tax and not knowing that, between spouses.
Speaker 4:What happens if you say, donate or give a large sum of money to your spouse?
Speaker 1:There's no donations taxed between spouses.
Speaker 2:You can donate anything to a spouse, a married spouse, without paying tax. They receive it same as when you die.
Speaker 4:But you can't do that with your children.
Speaker 2:No.
Speaker 4:Then 100,000.
Speaker 2:So they're promoting marriage in South Africa, but not family? Yeah, they are, but you can't just distribute your assets in any way, so you can distribute to your spouse and then, when you pass the second passing, you pass on the $7 million to your children. So, the first $7 million is free of estate duty.
Speaker 4:No, while you're alive, yeah, while you're alive.
Speaker 1:Yeah, so the donations tax and the estate duty is around the same amount. So you know, if you pass away and you leave everything to your spouse, there's no estate duty. Yes, so the same applies if you donate to your spouse while you are alive, that 20% isn't charged.
Speaker 2:But as soon as you donate to another person, like your children, you can do a hundred thousand a year and then in. Maybe in this case you could sue.
Speaker 4:Said you could do a loan, but as long as that loan is paid back with interest and there's an agreement in place okay, you can't post data an agreement, can you no?
Speaker 2:I don't think so. So when getting most companies, providers, ras, medical aides will post it on your tax return. So generally it should be a big help in doing your return. So for most people who get a salary medical aid deduction, ra, it should be an easy process to complete and it would be properly calculated by SARS. If you feel it isn't rather get a tax practitioner like yourself involved and rather open the case and do it properly. But you got until the 20th of October.
Speaker 3:Yes.
Speaker 2:Great. Thanks so much, Sue Awesome.
Speaker 1:Thank you.
Speaker 2:Thank you. Thank you for listening. If you have enjoyed this podcast would like to subscribe, please visit our website wwwgrowthfpcoza. The information we have provided in this podcast is our personal opinion. For more detailed information, please discuss your financial situation with a financial planner.