When it comes to tax preparation, they noted that the process will vary depending on whether the individual is a full-time employee, self-employed or an investor.
However, there are some common steps that everyone can take to ensure preparation for the tax season.
First, they said that people should take note of key deadlines to avoid the consequences of non-compliance.
“Familiarise yourself with the most recent basic changes in tax laws and how they may impact your tax affairs,” they said.
In particular, Kumalo and Thebyane highlighted two important tax changes that were made in 2024.
Firstly, section 12T(4)(a) of the Income Tax Act now allows for pro-rata application of the R36,000 annual contribution limit for tax-free investments if a person’s assessment year is less than 12 months.
Secondly, section 11F(2)(a) introduces pro-rata deductions for retirement fund contributions, with the R350,000 lifetime limit adjusted for shorter assessment periods.
According to Kumalo and Thebyane, tracking your different income streams is also a key part of the tax preparation process.
“Draw up a list of all possible income streams received and contributions made towards a retirement annuity, public benefit organisation and medical aid during the relevant tax year,” they said.
Critically, taxpayers need to ensure that they gather all necessary supporting documentation to substantiate income, permissible expenses, and contributions.
This is especially important if the South African Revenue Service (SARS) selects a tax return for audit.
While individual tax situations vary, Kumalo and Thebyane proposed a generic list of documents that taxpayers may need to collate, depending on the income streams received and contributions made during the relevant tax year:
“Consult with a reputable tax firm or practitioner on the most compliant way to declare the respective income and claim exemptions where applicable in conjunction with the Income Tax Act,” they added.
This can be an especially important way to help taxpayers avoid making simple and avoidable errors when filing their tax returns.
Kumalo and Thebyane explained that there are some common mistakes that people make when filing their taxes.
Missing provisional and annual filing deadlines, failing to consult with tax practitioners about changes in income streams, employment, or marital status, and neglecting to keep accurate supporting documentation are frequent errors.
Incomplete or inaccurate submissions may result in SARS disallowing unsupported declarations, as per section 102 of the Tax Administration Act.
“Some taxpayers mistakenly assume they don’t need to file their tax return if they haven’t earned significant income or if PAYE has already been deducted.”
They said this was not correct “since they still need to ensure that they maintain their compliance status and SARS may levy administrative penalties for non-compliance, per Chapter 15 in the Tax Administration Act”.
Other errors include failing to disclose all income earned, claiming impermissible expenses, and not adhering to section 23(g) of the Income Tax Act, which prohibits deductions for expenses not incurred in producing income.
While some of these errors may be to make, non-compliance can have serious consequences for taxpayers.
Administrative penalties range from R250 to R16,000 monthly until compliance is achieved. SARS may levy interest on overdue balances, while criminal prosecution for non-compliance can result in fines or up to two years of imprisonment.
Additionally, non-compliance hinders the ability to obtain tax clearance certificates or letters of good standing, impacting eligibility for government contracts or certain loans.
While many people may regard tax season preparation as an unpleasant, daunting task which they need to do to keep the taxman off of their back, proper preparation can also have one major benefit: reducing your tax burden.
According to Kumalo and Thebyane, there are a number of ways that individuals can do this.
“Take advantage of the permitted tax deductions, credits and exemptions as detailed in the Income Tax Act,” they said.
Contributions to South African-based retirement annuity funds and donations to registered public benefit organisations are particularly effective ways to help minimise your tax liability.
“Consult with a reputable tax firm or tax practitioner on any available tax relief measures that can be utilised based on your tax status and employment circumstances as a means of potentially reducing your tax burden,” they advised.
