How To Pay Less Tax

You may be at war with the tax man, figuratively speaking off course, because of the big chunk of your hard earned monthly income going to the tax man.  But I’d like to shed some light on this grim subject by telling you there are ways in which you can pay less tax.

But before I tell you just how exactly you can pay less tax, I’d like to direct this article by using an ordinary, every day example. Suzanne works at an 8 – 5 job and receives a taxable income of R14 000 per month, without any benefits. She contributes to her own medical fund (hospital plan) and retirement annuity. Suzanne isn’t educated and up to date with the income tax lax and wants to know if and how she can get back some tax money due to her medical aid and retirement annuity contributions.

So let’s start with Suzanne’s medical aid. In general the following applies to medical aids:
The allowable income tax deductions for contributions made by members to their medical aids for the 2009/2010 tax year is R625 for each of the first two beneficiaries and R380 for each additional beneficiary.
When it comes to retirement annuities the general guideline is as follows:
Retirement annuity contributions are deductible of the greatest of 15% of non-retirement funding taxable income, R3500 minus any allowable pension fund contributions or R1 750. If you haven’t claimed any contributions during the previous year you may include them to a deduction of a maximum of R1 800.

Individuals often make the mistake of assuming the tax deductions will refund their full contributions come tax submission time. That is not true. Contributions made are deducted from one’s gross salary before a taxable amount is arrived that. That means SARS will tax an amount equal to your salary less the deductions which results in a more favourable tax rate.

Now you are probably still wondering; how do you ensure SARS takes cognisance of these amounts? The answer is simple. Similar to your employer giving you an IRP5 at the end of the tax year that reflects your income and tax paid, the same way your medical aid and investment company are obliged to provide you an Income Tax Certificate. If you don’t receive these, you can request a duplicate original from the respective companies. These certificates can then be handed to your tax practitioner which they will capture and submit accordingly to SARS.You may be at war with the tax man, figuratively speaking off course, because of the big chunk of your hard earned monthly income going to the tax man. But I'd like to shed some light on this grim subject by telling you there are ways in which you can pay less tax.

But before I tell you just how exactly you can pay less tax, I'd like to direct this article by using an ordinary, every day example. Suzanne works at an 8 – 5 job and receives a taxable income of R14 000 per month, without any benefits. She contributes to her own medical fund (hospital plan) and retirement annuity. Suzanne isn't educated and up to date with the income tax lax and wants to know if and how she can get back some tax money due to her medical aid and retirement annuity contributions.

So let's start with Suzanne's medical aid. In general the following applies to medical aids:
The allowable income tax deductions for contributions made by members to their medical aids for the 2009/2010 tax year is R625 for each of the first two beneficiaries and R380 for each additional beneficiary.
When it comes to retirement annuities the general guideline is as follows:
Retirement annuity contributions are deductible of the greatest of 15% of non-retirement funding taxable income, R3500 minus any allowable pension fund contributions or R1 750. If you haven't claimed any contributions during the previous year you may include them to a deduction of a maximum of R1 800.

Individuals often make the mistake of assuming the tax deductions will refund their full contributions come tax submission time. That is not true. Contributions made are deducted from one's gross salary before a taxable amount is arrived that. That means SARS will tax an amount equal to your salary less the deductions which results in a more favourable tax rate.