The end of February, being the South African tax year end for individuals and trusts, presents numerous opportunities for clients. This is also a time when provisional taxpayers should carefully review their exposure in terms of the second provisional tax payment, and in this respect we would encourage clients to engage their accountants and tax advisors.
Individuals are able to contribute a maximum of 15% of their taxable income to a retirement annuity fund (RAF). This applies to taxable income that is not already being used to determine a contribution to a company provident or pension fund. In other words, income that a salaried employee is already making deductions from to put into the employer’s pension scheme is excluded from the 15% allowance – but any non-pensionable portion of their salary can still be used to make further RAF contributions (and claim the tax benefits).
This compares to someone self-employed, with no company pension scheme, who would be able to contribute 15% of their total income to a retirement annuity and gain the tax benefits for the full amount. New generation RAFs are flexible in terms of contributions and underlying investment strategy. Costs are also transparent and represent huge savings as compared to the older traditional RAFs.
The annual donations tax exemption is R100 000. This means that individuals can donate a maximum of R100 000 per annum before having to pay donations tax of 20%. This exemption applies per donor per annum and not per donation. Care should be taken when donating away a portion of a loan account, to ensure that a CGT liability does not arise.
Investors with share and investment portfolios should take special care when trading at this time of the year. In the event of other transactions generating a capital loss, and should one’s share portfolio be in need of rebalancing, it would be wise to rebalance before the end of February 2011 and offset this capital profit against the loss. On the other hand, there may be instances where a share sale would generate a capital loss which could be set off against other realised share gains.
In the event of the investor being on a high tax threshold and there not being an urgent need to trade, it may be wise to hold off the trade until March 2011 and thereby postpone the capital gain to the following tax year.
The message is that this time of the year makes it especially relevant to review share and investment portfolios as well as your entire financial position to ensure that tax saving opportunities are not missed.
Source: Tony Barrett Money Web
