Section 93(1)(d) – Reduced assessment due to undisputed error
Reduced assessment due to undisputed error The South African Revenue Service (SARS) offers taxpayers a streamlined process to correct certain errors in tax assessments without resorting to formal objection and appeal procedures. This process, facilitated through the Request for Reduced Assessment (RRA01) form, allows taxpayers to request amendments to assessments to correct undisputed errors under specific sections of the Tax Administration Act (TAA). What is an Undisputed Error? An undisputed error, as defined under Section 93(1)(d) of the TAA, refers to a clear and obvious mistake in an assessment that both SARS and the taxpayer agree upon. These errors are factual, clerical, or typographical and are identifiable without requiring any legal interpretation or dispute over facts. Correcting these errors can be achieved without the need for a formal objection or appeal. Examples of undisputed errors include: Numerical or data entry mistakes in the taxpayer’s return. Clerical errors in the documentation submitted to SARS. Simple omissions that are not subject to differing interpretations (The correction does not involve any interpretation or legal argument, and there is no dispute over the facts.) When does undisputed error apply? Sections of the TAA Permitting Reduced Assessments SARS may reduce an assessment under the following sections of the TAA: Section 93(1)(d) – When there is a readily apparent undisputed error in: The return submitted by the taxpayer; or The assessment issued by SARS. Section 93(1)(e) – When SARS is satisfied that an assessment was based on: The failure of an employer or third party to submit a return; An incorrect return submitted by an employer or third party; A fraudulent return submitted by an unauthorized person; or A processing error by SARS. Important Considerations: Both sections require that the errors must be undisputed; if there is any contention or disagreement about the error, these provisions cannot be used. The application for these adjustments must be made within the prescribed period, typically three years from the date of the original assessment The Request for Reduced Assessment (RRA01) The RRA01 form provides a less formal mechanism for taxpayers to request SARS to amend an assessment, thereby reducing the assessment amount without going through the objection and appeal process. This option is particularly useful for quickly rectifying straightforward errors that do not involve complex legal disputes. Key Considerations for Using the RRA01 Form Limited Application: The RRA01 form does not replace the formal objection and appeal process but offers a less formal way to resolve errors that are readily apparent. It is only applicable under specific, limited circumstances where all requirements are met. Prescription Period: If an assessment has been prescribed (i.e., it is older than three years), an RRA01 in terms of Section 93(1)(d) will not be allowed. However, a separate RRA01 may be submitted under Section 93(1)(e) if applicable. Cases in Progress: If any of the following cases are in progress for the same assessment, a warning message will display, and the RRA01 form cannot be submitted until resolved: Revised Declaration Estimated Assessment Agreed Estimate Dispute Cases: If a dispute case is in progress for the same assessment, the RRA01 form can only be submitted after the dispute has been finalized. Active Audits or Requests for Relevant Material: If there is an active audit or a request for relevant material for the same year of assessment, the RRA01 form can only be submitted once these cases are finalized. JAWS Compliant: The RRA01 form is JAWS (Job Access with Speech) compliant, making it accessible to blind and visually impaired users. JAWS allows these users to read the screen using text-to-speech output or a refreshable Braille display, ensuring the RRA01 form on eFiling is fully accessible. Conclusion: The RRA01 form provides a valuable tool for taxpayers to correct certain errors in tax assessments without navigating the formal objection and appeal channels. By utilizing this form, taxpayers can address straightforward mistakes efficiently, ensuring that their tax affairs are accurate and up-to-date while minimizing the administrative burden on both themselves and SARS. However, it is crucial to understand the limitations and requirements associated with this process to ensure that the RRA01 is used appropriately. If you’ve identified an error in your tax assessment, don’t delay—utilize the RRA01 form for a quick and efficient correction process. Visit SARS eFiling today to submit your request and ensure your assessments are accurate. For guidance on completing the RRA01 form, or if you’re unsure whether your error qualifies, contact us for expert assistance.
Should I Submit a Tax Return in 2024? Essential Tips for All South Africans
Should I Submit a Tax Return in 2024? In this article, we look at whether you should submit a tax return. At the end of the article, we will post a form that can assist you in deciding whether you need to submit a tax return. Not everyone should submit a tax return. Here are some guidelines: Who should not submit a tax return: A natural person or a deceased estate is not required to submit a return if their gross income consists solely of one or more of the following: Remuneration (other than retirement lumpsum) not exceeding R500 000 and this is from a single source and where PAYE has already been deducted Interest income from a South African Source (not including Interest from Tax-Free Investment vehicles) and this interest does not exceed: R23 800 for a person younger than 65 years 34 500 for a person who is 65 years or older or 23 800 for a deceased estate Tax-exempt dividends where the individual was a non-resident throughout the year of assessment; Amounts received or accrued from tax-free investments; and A lump sum received from a retirement fund with tax deducted according to a tax directive. Non-residents are required to submit a tax return if: The non-resident carried on a trade (business) in South Africa The non-resident disposed of an asset in respect of which the Eith Schedule applies The non resident’s gross income included interest from a source in the Republic to which provisions of section 10(1)(h) of the income tax Act doe snot apply The above scenarios do not apply where: You are paid or granted certain allowances relating to business travel, accommodation or subsistence You are granted table benefits or advantages derived by reason of employment or the holding of any office You received or accrued any amount in respect of services rendered outside South Africa. Commonly asked questions: What do I need to know concerning the 2024 tax season We have created a guide for you here. Am I supposed to submit a tax return? You need to submit a tax return if you meet specific criteria such as earning above a certain threshold, having multiple sources of income, or wanting to claim tax refunds and rebates. Criteria include: Earning above the tax threshold. Having more than one employer or income source. Earning rental income, capital gains, or foreign income. Wanting to claim deductions for medical expenses, retirement annuities, or other tax credits? Do I need to file a tax return with SARS? If you meet the criteria above. Filing a tax return ensures that you comply with tax laws, potentially receive refunds, and accurately report all sources of income to SARS. Why is it important to submit tax returns? Submitting your tax returns is crucial for several reasons: Compliance with legal obligations. To claim refunds or rebates due to overpaid taxes. Avoiding penalties and interest charges for non-submission. Ensuring accurate records with SARS, which can be beneficial for future financial planning. Ensuring you have a complete record of filing tax returns and avoiding penalties for non-submission of tax returns What happens if you don’t submit a tax return in South Africa? Not submitting a tax return can lead to: Penalties for late submission or non-submission. Interest charges on unpaid taxes. Possible legal action by SARS. Missed opportunities for tax refunds or rebates. How much tax will I pay if I earn R6000? If you earn R6000 per month (R72,000 per year), you are below the tax threshold and typically will not pay income tax. For the 2023/2024 tax year, the tax threshold for individuals below age 65 is R95,750 per annum. What does IRP5 mean? An IRP5 is a tax certificate issued by employers to employees. It details the income earned and taxes deducted during the tax year, which is necessary for filing your tax return. Where do I get my IRP5? Your employer should provide your IRP5. It can also be accessed on your eFiling profile if your employer has uploaded it to SARS. But, it is important to request it from your employer as it forms part of supporting documents for your tax return. When can I submit my SARS tax return in 2024? The 2024 tax season opens on July 15, 2024. Auto assessment will start on 1 July 2024. How to reduce taxes in South Africa? You can reduce your taxes by claiming allowable deductions such as: Medical aid contributions and expenses. Retirement annuity contributions. Donations to registered charities. Home office expenses. Tax-free savings accounts. Ensuring all allowable business expenses are claimed if you are self-employed. Keeping detailed records and documentation to support your claims. You can read more about basic tax deductions here What if I am aggrieved by SARS? Review the Assessment: Carefully examine the assessment details and gather all supporting documentation. Request Reasons (Optional): Seek detailed reasons from SARS within 30 days of receiving the assessment to understand its basis, if unclear. File an Objection: Submit a formal objection, including necessary documents and legal arguments, within 80 business days of the assessment date or the date SARS issues the reasons. Appeal: If dissatisfied with the objection outcome, lodge an appeal within 30 business days of the notice. This may involve Alternative Dispute Resolution proceedings if elected. Still unsure if you need to submit a tax return? Click here to find out if you should file a tax return. How can we assist you? We can help you with: Filing a tax return and tax return preparation Interpretation SARS missed assessments Filing an objection Tax planning and advisory Bookkeeping and accounting Payroll services VAT registration VAT return preparation and submission Tax training and workshops Retirement and estate planning Leave a message/get a quote Subscribe now:
How to get a SARS refund quickly; Essential Preparation Guide for Faster Tax Refunds
How to get a SARS refund quickly? We are reaching out early to ensure you’re fully prepared for the upcoming tax season. Once it opens, you’ll be ready to submit your tax return and potentially receive your refund sooner. Why wait? What do you need to get ready? You will need: Necessary documentation for submission. To address any administrative issues. Information on auto-assessments. Knowledge of basic deductions you can utilize. Documentation: The responsibility for proving entries on a tax return lies with the taxpayer. It’s crucial to compile documents throughout the year as you receive them. If you haven’t started, now’s the time to gather: IRP5s issued by your employer. If not received, request them politely. Medical aid and retirement annuity tax certificates are typically available via provider apps. Profit and loss statements if you run a business or are a sole proprietor. Details of rental income and expenses. Invoices supporting business and rental expenses. Home office expense details and corresponding invoices. Investment certificates for interest, dividends, and capital gains. Section 18A certificates for any donations made. Travel logbook for business travel claims. Details of non-personal use assets sold during the tax year. Any additional documents supporting your tax return. Admin Issues: Ensure your eFiling login details are handy and functional. Verify and update your bank details with SARS to avoid delays in receiving refunds. Auto-Assessments: SARS may issue an auto-assessment using data from third parties like medical aids or retirement funds. If you agree with the assessment, no action is needed. If you disagree, you have 40 working days to file a correction. If you miss the deadline, you can request an extension within 21 additional working days. Basic Deductions You Can Claim: Understand the deductions available to legally reduce your tax liability, such as: Medical aid tax credits. Retirement annuity contributions. Donations. Home office expenses. Tax-free savings. Foreign income exemption. Interest exemption. Travel expenses. Wear and tear. Business expenses. Capital gains exclusion. Frequently Asked Questions: How to get a SARS refund quickly? To get a SARS refund quickly, ensure you submit a complete and accurate tax return as soon as the tax season opens. Gather all necessary documentation beforehand, resolve any administrative issues, and verify that your bank details are up to date with SARS. Not having the correct and updated bank details may unnecessarily delay your refund. How quickly does SARS pay a refund? SARS typically processes refunds within 21 business days after a tax return has been submitted and assessed. However, this can vary depending on the accuracy of your submission and if any additional reviews are needed. Can you get your refund instantly? In some instances, SARS refunds within a few days, even a few hours especially where all is in order and there are no audits or verifications needed. While you cannot get your SARS refund instantly, ensuring that your tax return is accurate, complete, and submitted early can help expedite the process. Make sure all your documentation is in order to avoid delays. How to get a SARS refund quickly? You can speed up your SARS refund by promptly submitting a complete and accurate tax return with all required documentation. Regularly check your SARS eFiling profile for any updates or additional requests for information and respond quickly to any additional requests from SARS. What’s the fastest I can get my tax refund? The fastest way to get your tax refund from SARS is to file your return as early as possible, ensure all details are correct, and have all supporting documents ready. Typically, refunds are processed within 21 business days, but early and accurate submissions can help avoid delays. We encourage you to submit your tax return as soon as the tax season opens and to do so accurately and completely. Additionally, do not delay sending supporting documents to SARS as may be required. Why was my tax refund reversed by SARS? I do not understand why the refund that was due to me disappeared from my Sars statement. The refund was reversed for the following most likely reasons: – There is a special stopper on your account; – You have two valid bank accounts reflecting on your registered details and/or – You do not have valid bank details registered with SARS – Also, check if they issued a “verification completed with changes letter” How we may help: We are eager to assist you with your tax affairs, including tax return submission, interpreting assessments, and objections to issued assessments. Feel free to reach out for any help or information. Leave a message/get a quote Subscribe now:
What should you know about Auto Assessment?
What should you know about Auto Assessment? What is an auto-assessment? An auto-assessment is an automatic assessment issued on taxpayers by SARS. This basically means that SARS has collected taxpayer information from their parties (such as medical aid or retirement annuities) and then use this information to file your return and issue an assessment on this return automatically without your involvement. How will you know if you are auto-assessed? You should receive an email or SMS from SARS informing you that you have been selected for auto-assessment. The process started in July 2022. But, this is not the first time SARS has issued an auto-assessment. They also issued these in the 2021 tax year. What should I do if I receive an auto-assessment? SARS says if you agree with the aut0-assessment, you do not have to do anything. However, should you be in disagreement, you have just 40 working days from the date of assessment to file a correction (edited tax return.) What happens if you miss the 40 days? If you do not do anything, SARS assumes you are in agreement with the auto-assessment. The assessment becomes your final assessment at the expiration of the 40 business days. Can I request an extension? If you feel the 40 working days are too little, you can request an extension on eFiling before the 40 days have expired. SARS will require “reasonable” grounds for the request. if you miss the deadline, you will have an additional 21 working days to submit a request for an extension on the same terms. If both 21 and 40 days have passed and you still were not able to submit a correction, you will need to provide “exceptional circumstances” to justify a delayed request for extension. NOW TO THE BIG QUESTION, SHOULD I ACCEPT THE AUTO-ASSESSMENT? We think this is a risky move if (and SARS may not pick up these things on an auto-assessment:) 1. You have qualifying donations you would like to claim 2. You have qualifying out-of-pocket medical aid expenses 3. Your medical aid is being paid for by someone who is not the principal member (normally the person paying for the medical aid would be the one to claim the medical tax credits.) 4. You have capital gains on assets that you sold that fall outside the scope of an auto assessment 5. You are a crypto or share trader 6. You have a side business or rental income (profit or loss) 7. You have and qualify for a home office expense claim (deductions) 8. You would like to claim your business travel kilometres 9. SARS missed one or some of your retirement annuity funds Contact us: Was this helpful? Would you like us to do your tax return? Get in touch with us: Leave a message/ get a quote Subscribe now:
What are the tax implications of trading or buying shares?
What are the tax implications of trading or buying shares? The tax implication for having shares boil down to two things, whether your gain is income in nature or capital (gain) in nature. Let’s start by defining these two things: Income: Shares held as trading stock are bought mainly for resale at a profit. In other words, any shares held for speculative purposes normally fall under this category. The profits or any gain or loss made on the disposal of such shares (held for-profit/speculative) purposes will be of a revenue nature and will not be subject to capital gains. Gains of a revenue nature are subject to tax at marginal tax rates that vary between 18% and 45% depending on the circumstances of the taxpayer after taking into account all his/her other income (such as salary, rent, business income e.t.c.) The taxpayer can also deduct expenses directly related to the trading of these shares such as broker fees, transaction fees, subscription to broker news, tools and platforms and any such costs directly related to the trading of these shares. Capital: On the other end of the spectrum, for shares held as a capital asset (that is as a long-term dividend producing investment,) any gains or losses arising from such shares (held for investment/dividend earning) upon disposal will be of a capital nature. Gains that are of a capital nature are subject to capital gains and at a lower tax rate than gains of a revenue nature. Firstly, you get an exclusion of R40 000 as an individual on your gains. This means that you start paying capital gains tax if your gains exceed R40 000 for a tax year (year of assessment.) This is known as the annual exclusion. For natural persons dying during or after the 2020 tax year of assessment, the exclusion is R300 000. In addition to the annual exclusion, 40% of the gains are included in taxable income and then taxed as the normal marginal tax rates that apply to your salaries or other income. This 40% is known as the inclusion rate. Assuming that your marginal tax rate is 45% (the highest tax bracket,) the maximum you pay on capital gains is 18% (0.4 x 0.45 = 0.18.) Yes, you guessed it right, there can be 0% tax on your capital gains when: The sum of capital gain and losses does not exceed the annual exclusion; The sum of capital gain is less than or equal to the sum of capital losses (which means your gains set off against your gains); or Taxable income falls below the level at which normal tax becomes payable, that is if your combined income plus gains fall under the tax-free threshold. The effective rate (of 18%) we spoke about earlier applies if you fall in the highest tax bracket as an individual taxpayer. The rate is different from that which applies to companies or trusts. Companies and trusts, other than special trusts, pay a higher CGT than natural persons. They do not qualify for the annual exclusion and must include the capital gain at 80% of the gain into their taxable income. These are the effective tax rates: Companies are at an effective rate of 22.4% which is derived from the 80% inclusion rate and the 28% normal taxes for companies (0.28 x 0.8.) A trust that is not a special trust si at 36% effective tax rate for capital gains (0.45 x 0.8) What we have done above is the simplest way to look at share-holding. Are things that simple? Not always. The line between gains/losses of a revenue nature or gains of a capital nature can be a bit blurry. Capital vs revenue: When computing your tax liability, the first step is to determine if your gains are capital or revenue in nature. Apart from the three-year rule according to Section 9C (that basically says you must own a share for at least 3 years for your gains to be treated as capital in nature,) the Tax Act itself does not provide objective rules to distinguish between gains of revenue and capital nature. This task has always been left to the courts, which over the years have established some rules for this distinction. So, the onus is on you as the taxpayer to prove that your gains are of a capital or revenue nature. The most important factor in establishing the nature of your gains is the intention. This is not always an easy task since you can have more than one intention at a time and since intention can change over time. But, the courts have established that the taxpayer evidence as to intention must be tested against the surrounding circumstances of the case. These may include, the frequency of transactions, method of funding and reasons for selling. These may help establish your intention when you bought or sold the shares (Elandsheuwel Farming (Edms) Bpk v SBI.) “If they (the shares) were bought as a long-term investment to produce dividend income, the profit is likely to be of a capital nature. But if the shares were bought for resale at a profit, the profit will be of a revenue nature.” In SIR v The Trust Bank of Africa Ltd it was established that for a profit to be of a capital nature, “the slightest contemplation of a profitable resale need not be excluded. Where there were mixed intentions, the dominating intention is the one that establishes intention (COT v Levy.) Some general guidelines/Principles (source, the SARS guide on tax implications on shares:) Any profit or loss on disposal of shares will be of a revenue nature if they were purchased for resale as part of a scheme of profit-making (Californian Copper Syndicate (Limited and Reduced) v Harris (Surveyor of Taxes) A profit on the sale of shares is more likely to be of a revenue nature if it was not fortuitous, but designedly sought for and worked for (CIR v Pick ’n Pay Employee Share Purchase
Can I deduct home office expenses?
Can I deduct home office expenses? These days the work culture has changed. Since lockdown was introduced. Some companies had to close shop and some employees were required to work from home. Also and in general, the world is changing and so is the way people work and interact. Many people, like myself, prefer working from home. Working from home has become a normal thing. The GIG economy will also make working from home just another normal thing. Luckily, SARS allows home office deductions if certain conditions are met. However, it is important to note that SARS often than not flag returns with home office expenses for audit. So it is important that one correctly and accurately claims these deductions. It is worth understanding the rules around home office expenses as they are allowed under certain circumstances. Not everyone may end up deducting home office expenses. Having said this, it is important to point out that the situation is different for self-employed people or what we would term sole proprietors or freelancers who work from home. These taxpayers can automatically deduct their home office expenses. These taxpayers (self-employed, sole proprietors, freelancers) do not need to work through the tight conditions required for one to be able to deduct home office expenses. They simply have to include their home office expenses with the local business, trade and professional income on their tax return. What is required to be able to deduct home office expenses? The employer must allow the taxpayer to work from home. So, you can’t just work from home because you want to. Your employer must give you express permission to work from home. The taxpayer must spend more than half of their total working hours working from their home office. The part of the home in respect of which a claim is submitted must be occupied for purposes of a “trade”, as defined in section 1. So, in essence, there should be a specific part of the home that is used exclusively for this purpose. As an example, a specific set aside office must be kept aside for the trade. A taxpayer meeting with a client in the bar area of their home may not qualify for these deductions. Building from the point above, the part that is so occupied must be specifically equipped for purposes of the trade. So, it is important that space/office must be specially fitted with the relevant instruments, tools and equipment required for the taxpayer to perform their work. The part must be regularly and exclusively used for purposes of the trade. As an example, taxpayers who earn a commission but who spend the majority of their time on the road visiting clients and performing their work at the client’s premises do not qualify for home office expense deduction. What expenses can be deducted? First, one needs to check the taxpayers’ remuneration structure to see if they are: A commission earner, that is, takes more than 50% of their total remuneration from the commission or some other variable form which is based on their performance. A normal salaried employee with variable payments/commission making up less than 50% of their total remuneration. The commission earners can deduct the following: Rent Interest on bond Repairs to premises Rates and taxes Cleaning Internet Wear and tear and All other expenses relating to their house as well as other commission related business expenses (such as telephone, stationery, repairs to printers, maid answering phone in your absence etc) The salaries employee with variable payments/commission making up less than 50% of their total remuneration can deduct: Rent of the premises Interest on the bond Cost of repairs to the premises and other expenses in connection with the premises Rates and taxes Cleaning Internet, Wear and tear and all other expenses relating to their house only. How to calculate the home office deduction: One would need to work out/measure the total square meterage of the office in relation to the total square meterage of the house. This is then converted into a percentage. The percentage is then used to apportion the expenses that can be used for home office deductions. Example: Mrs taxpayer is a software engineer who works for Corona Company Pty Ltd. Her remuneration consists of a salary only (no commission.) Her Company allows her to work from home three days per week. Mrs taxpayer has a separate office at home, fitted out with a computer and printer, which she uses exclusively for her software engineering job. Her office is 30 square meters, and the floor space of her entire home (including the office) is 300 square meters. During the tax year, she incurs the following expenses: – R120, 000 interest on a bond – R36, 000 rates and electricity – R36, 000 paid to the cleaner – R5, 000 roof repairs – R12, 000 cell phone expenses Based on the above information, Mrs taxpayer qualifies for home office deduction. Based on the space occupied by her home in relation to the entire house, the apportionment ratio is 10% (30/300). Therefore her home office deduction is 10% x (120 000 + 36 000 + 36 000 +5 000) = R19 700. Her cell phone costs will not be deductible since she is not a commission earner. Will I qualify for a home office deduction for the 2021 tax season? The 2021 tax season started 1 March 2020 and ends 28 Feb 2021. To be able to claim home office expenses you would need to have met the conditions specified earlier. You will also need to have ended up working from home for more than six months of the tax year. That is, you would have worked from home until at least the end of September 2020. Need help claiming your home office expenses or finding someone who can deal with SARS on your behalf? Leave a message Subscribe now: