How to (legally) reduce your tax bill - and other fun tax facts

There is an old saying that goes something like this:

‘There are only two certainties in life: Death, and taxes.’

Here at Velocity Club, as bright as we are, we can’t do anything about death (as morbid as that sounds) but we can do something about helping you understand taxes. Today’s blog is all about taxes and tax returns. We’ll learn some of the key basics you need to know in order to pay and maintain your tax account.

First up, let’s have a look at SARS’ new Auto Assessment system.

SARS Auto Assessment

The SARS Auto Assessment is a new assessment procedure that produces an automatic assessment of your tax bill.

The system will send you an SMS and you’ll have 3 options: You can either Accept or Edit the assessment, or you can Do Nothing about it. Here’s what those 3 options mean.

Accept:

If you are going to go this route, you need to be aware that the data used to pre-populate the fields on your tax return may be incorrect or incomplete. For example, it won’t include donations, rental income, offshore income, and many others. If you want to add those items, you’ll use the Edit option.

Edit:

If you are a taxpayer with other forms of income beyond your salary, you must select the Edit option so you can include that additional information.

Do nothing:

Under this option, if you don’t do anything before 16 November, SARS will issue an ‘estimated assessment’ in terms of Section 95 of the Tax Administration Act. This assessment will be issued after 29 January 2021. In this scenario, your right to appeal is limited by the Act.

If you accept an incorrect Auto-Assessment, how can you correct it?

In this case, and assuming an ITA 34 has been issued (ITA 34 is SARS’ income tax assessment), you can check to see if the ‘make a correction’ option is still available. If it is, you can then submit a revised assessment.

If the correction option isn’t available, you can make use of the Voluntary Disclosure Programme (VDP) if taxes were underpaid. Understatement and underestimation penalties as well as late payment penalties can be avoided in this case, but interest will still be payable.

You can also request a reduced assessment within 3 years from the date of the assessment in terms of Section 93 of the Act if taxes were overpaid.

Conclusion

Taxes can be overwhelming, but today we’ve tried to provide a simplified breakdown of various tax-related issues. We’ve explained SARS Auto Assessment system and how you can interact with it. And we’ve finished with a pretty detailed list of all the ways you can legally reduce your tax bill. Hopefully this has been informative for you and that it has answered some questions you may have had about your tax bill. If you have any other questions about how you can structure your finances as wisely as possible in relation to your tax, please speak to your Velocity Club relationship consultant. They are ready and waiting to hear from you.