Thursday, October 23, 2014

 

PSIberDOCS.......Tax Rules Made Simple


Deductions


Donations | Income Insurance / Protection Policies | Medical Aid Contributions | Pension Fund Contributions | Provident Funds | Retirement Annuities | Unemployment Insurance Fund
 
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DONATIONS

Donations to Universities, Colleges, Technikons and education funds may be deducted up to a maximum of:

This is generally a tax return item.

As from 1 March 2007, Tax exempt donations were raised to R100 000 (previously R50 000) for individuals. Donations tax is payable at a flat rate of 20% on the value of property donated. 


Donations | Page 1 of 7 | Income Insurance / Protection Policies

Allowances


Allowances are paid by an employer to an employee to enable the employee to meet the cost of expenditure incurred on behalf of the employer. This generally forms part of the employee's taxable income.

Generally allowances are fully taxable on a monthly basis. The benefit is realized at the end of the financial year, when the employee deducts the actual expenses from their taxable earnings i.e. claim back the tax that has been paid on the allowances. The deduction must not exceed the  amount of the allowance. 

·          Business travel deductions against car allowance

·          Subsistence allowance

·          Medical Expenses according to defined limits

·          Pension and Retirement Annuity contributions

·          Donations to certain public benefit organizations

·          Expenditure against allowances of Holders of Public Office

·          Wear and Tear allowances on equipment

·          Public Office allowance

·          Uniform allowance

·          Tool allowance

·          Telephone allowance

 

 

Holders of Public Office Allowance | Subsistence Allowance | Travel Allowance | Cellphone OR Telephone Allowance | Computer Allowance | Entertainment Allowance | Transfer Costs (Relocation) | Uniform Allowance
 
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SUBSISTENCE ALLOWANCE

Tax Free - This is a tax free allowance where the allowance is for expenses incurred for 'incidental costs' or for meals & incidental costs' as a result of spending at least one night away from home, on business for your employer. If you are required to undertake business trips away from your normal place of residence on a regular basis, you may receive a standard monthly subsistence allowance. Such subsistence allowance is not subject to PAYE but will be assessed at tax year end by SARS. Where you wish to claim for expenses in excess of these limits, you will have to prove to the Receiver that you have actually incurred those expenses.

Please Note: A subsistence allowance is intended for abnormal circumstances and therefore cannot form part of your remuneration package.  Also, a subsistence allowances cannot be paid for the anticipation of cost to be incurred.

Taxable - As soon as you receive an allowance in excess of the limits (please see below), the full amount will be reflected as a taxable allowance on your IRP5. PAYE will however not apply to the allowance. 

Local Travel:

  • Incidental Costs only - R73.50 per day
  • Meals & Incidental Costs - R240.00 per day

Overseas Travel:

  • Actual accommodation costs plus US$215.00 per day, for meals and incidental costs, for continuous periods not exceeding six weeks.
  • Where the period of 6 weeks is exceeded, the allowance paid must be declared in full on the employee's tax certificate, and the employee must claim his actual expenditure at tax year end.

Per day – this includes each day or part of a day that you are away from home. Therefore, you may have spent only one night away, but are entitled to claim for the two days that you were away.

If the allowances do not exceed the monetary or the 6 week limits, employees tax will not be deducted and the allowances will not be included in gross remuneration on IRP5 certificates.

Example:

You are required to go on a one week business trip within SA
You are given a R200 per day allowance to cover all expenses (meals & incidentals)

Subsistence Allowance             7 x R300 = 2 100
Deemed Expenses                    7 x R240 =  1 680
Taxable portion                                               420

You are required to go on a one week business trip within SA
You are given a R100 per day allowance to cover all expenses (meals & incidentals)

 Subsistence Allowance             7 x R100 =    700
 Deemed Expenses                    7 x R240 =   1 680
 Taxable portion                                                   0

 


Holders of Public Office Allowance | Page 2 of 8 | Travel Allowance

Fringe Benefits


The package you receive from your employer may include certain benefits apart from your cash remuneration. These benefits, as listed below, are known as 'fringe benefits'. For income tax purposes, it is necessary to place a monetary value on these benefits and include it in your taxable income.

The fringe benefit is only worthwhile if the taxable value thereof is less than the cost of the actual benefit.

 Fringe benefits are usually valued as follows:

Cost of the benefit to the employer                              5000
Less any amount paid by employee for the benefit   - 2000
                Amount included in taxable income             3000

The exceptions to the above calculation are:

  • Company car
  • Residential Accommodation
  • Holiday Accommodation
  • Low Interest or Interest free loan
  • Company paid Medical Aid contributions  
Acquisition of Asset for Less than Market Value | Bursaries/Scholarships (Education Costs)  | Deemed Loans | Free or Cheap Services  | Holiday Accommodation | Loan Subsidy | Low or Interest Free Loans | Meals / Refreshments / Vouchers | Medical Aid  | Medical Expenses | Payment of Employees Debt | Residential Accommodation (Provision of) | Share Incentive Schemes (Broad Based Employee Shar | Subscriptions  | Use of Assets (excluding Car & Accommodation) | Use of Motor Vehicle / Company Car
 
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ACQUISITION OF ASSET FOR LESS THAN MARKET VALUE

You are regarded as having derived a taxable benefit, if you acquire any asset free or for less than its value from:

  • your employer
    or
  • associated institution in relation to your employer
    or
  • any other person by arrangement with your employer

Asset in this context refers to:

  • Goods
  • Commodities
  • Marketable securities
  • Property of any nature (other than money)

Value is defined as follows:

  • If it is not a movable asset, the market value at the time that you acquired it
  • If it is a movable asset:
    • your employer acquired it in order to dispose of it to you, the employer's cost price will be taken as the value
      OR
    • the asset was the employer's trading stock, the employer's cost price will be taken as the value. If it can be shown that the market value is less that the cost price, then the market value will apply.

The above rules do not apply to marketable securities or an asset on which the employer had the right of use before acquiring ownership thereof e.g. a leased asset on which the employer had the right to acquire ownership at the end of the lease agreement. If an employee acquires marketable securities or such asset, the value would be the market value.

Exempted from tax are:

  • The first R5 000 of the cost to your employer of all the assets (not money) presented to you by your employer during the tax year as awards for bravery
  • The first R5 000 of the cost to your employer of all the assets (not money) given to you by your employer during a tax year for long service, which is taken as an initial unbroken period of service of at least fifteen years or any subsequent period of at least ten years
  • Fuel or lubricants supplied by your employer for use in a motor vehicle of which your private use is a fringe benefit (see 'Right of use of motor vehicle')

 


Acquisition of Asset for Less than Market Value | Page 1 of 16 | Bursaries/Scholarships (Education Costs)

Other


Gratuities (Lump-sums)
 
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GRATUITIES (LUMPSUMS)

A gratuity is a voluntary amount paid to an employee by an employer in respect of his/her termination of service.  Common examples are:

  • Retrenchment
  • Retirement
  • Resignation / Discharge

The first R30 000 of an amount, received by or accrued to an employee because of the termination of his services or because of the impending termination of his services within five years, is exempt from tax provided that:

  • The taxpayer has attained the age of 55
    OR
  • The employer died before retirement
    OR
  • The termination or impending termination (within 5 years) is due to ill-health or other infirmity
    OR
  • The termination is as a result of his employer having ceased business, or where he has affected a general reduction in personnel or  a reduction in personnel of a particular class

The exemption does not apply where the employer is a company and the employee was at any time a director or at any time held more than 5% shares of the company's issued share capital.

Please note that with effect from 23 February 2000, restraints of trade paid to natural persons or 'employment companies' are included as income in the hands of the recipient, and will be taxed as such.  The payer may deduct such payment over the longer of the period of the restraint of 3 years.

 


Gratuities (Lump-sums) | Page 1 of 1 | Gratuities (Lump-sums)