The South African Revenue Service (Sars) has implemented some big changes to personal income tax returns, trust tax returns and pay-as-you-earn (PAYE) penalties for the Filing Season 2023, that affect individual taxpayers, trustees, employers and tax practitioners.
Each year, there are several changes in tax legislation, which means keeping up to date with and understanding the legal intricacies can be challenging. Fortunately, there are experts who can navigate this quagmire. Tax practitioners keep informed about all tax legislation updates – so that you don’t have to.
“The purpose of tax practitioners is to provide you with assurance that you don’t under-claim, and that you are safe and sound from a Sars audit,” said Keith Engel, the CEO of the South African Institute of Taxation (SAIT).
It is important to check that your tax practitioner is registered with a recognised controlling body such as SAIT – this is a legal requirement from Sars.
Here are five reasons why you should use a registered tax practitioner this filing season:
1. Have you been auto-assessed? Best to double-check
Since last year, Sars commenced with issuing “original estimated assessments” as part of the auto-assessment process to taxpayers whose tax affairs are seemingly uncomplicated. While this may take the hassle out of processing your taxes, Sars’ auto-assessment may not be correct.
Consider getting a tax practitioner to check your auto-assessed tax return. If you are not in agreement with the auto-assessment, you will have to file a tax return and a tax practitioner can do this on your behalf. This will ensure that you’ve claimed for all possible allowable expenses and can avoid penalties by declaring income and deductions accurately.
2. Get to grips with personal income tax enhancements
Sars has instituted various personal income tax enhancements this filing season that can be difficult to understand and calculate, in which case a registered tax practitioner can assist you in processing your tax return correctly.
Assessment for spouses married in community of property:
- Taxpayers who are married in community of property are each taxed on half of their passive income, including interest on investments, dividends, rental income and capital gains.
- For Filing Season 2023, Sars has retrieved the “married in community of property” status from each taxpayer’s previous declaration and has collaborated with the Department of Home Affairs to confirm their marital status.
- Where the spouses are successfully matched by SARS and have interest-bearing investments, Sars will replicate the interest investment certificate on both spouses’ returns (based on a 50/50 division) where they will each be taxed on half of the total passive income upon assessment – this illustrates the fact that cross-checking and calculating passive income can be complex.
Foreign income disclosure: South African resident taxpayers must declare foreign-derived income and there are three new fields on the 2023 tax return based on certain exemptions – for example, if people are paying tax in another country and/or working in both South Africa and abroad, it’s important to select and complete the correct field.
Statement of assets and liabilities: Provisional taxpayers with business interests are required to declare their assets and liabilities (based on cost) in their tax returns each year. Those with assets above R50 million must declare specified assets at market value on their 2023 tax return.
3. Navigate trust income tax return enhancements
Submitting trust tax returns can be complicated and it would be best to use a registered tax practitioner to file this type of return for you.
The Income Tax Return Wizard (on the form wizard tab) has been updated to include additional questions about the number of trusts and to determine if any local or foreign amount(s) were vested in the trust as a beneficiary of another trust, or are deemed to have accrued during the year of assessment. Based on the questions, the required number of fields for these distributions will be opened in the return.
There is a new, simplified return for passive trusts and the correct type of return must be selected on the Tax Return Wizard.
Other enhancements to the trust return (ITR12T) include a new field for credit agreements and debtors’ allowances “lay byes”, and a beneficial ownership declaration. All mandatory supporting documents must be uploaded and submitted with the trust return.
4. Avoid PAYE under-estimation penalties
Tax practitioners can help you avoid penalties or, if they are unavoidable, assist with administrative penalty adjustments. A monthly administrative penalty of 10% of the total of the employee’s tax amount as estimated by Sars (on readily available information) may be payable if the total amount of employee tax deducted or withheld, or that should have been deducted or withheld for the period, is unknown.
5. You could get a refund within 72 hours (if one is due)
In preparation for Filing Season 2023, Sars sent out a statement saying it is taking a hard line with tax practitioners who submit inaccurate declarations, while adding: “The vast majority of tax returns filed by tax practitioners on behalf of the taxpayers they represent are accurate and complete. These compliant taxpayers enjoy a seamless experience, where their assessment is issued within five seconds of submission and a refund, where payable, is paid within 72 business hours.”
Considering the complexities associated with certain types of tax returns, it's a good idea to have a registered tax practitioner in your corner, said Engel. “Recognised controlling bodies ensure that tax practitioners stay on the straight and narrow,” he added.
“SAIT is, however, more than just a recognised controlling body or practising licensing body – we offer a variety of tax services to ensure that our members have the latest updates and resources at their fingertips,” said Engel.