You are not required to file a return if:
* Your annual income falls below the tax-filing threshold of R500 000 (recently raised from R350 000).
* You have received income from one employer only for the full tax year.
* You have received no other income (for example, a car allowance, business income, rental income, taxable interest, or income from another job, or from an annuity).
* You are claiming no additional deductions, such as for medical costs, retirement annuity contributions and travel expenses.
But, before you rejoice at the idea of not having to deal with the SA Revenue Service (Sars), remember that squaring up annually with the Receiver is not the only reason to engage with the taxman. For one thing, providing your tax number is part and parcel of the payroll take-on process, your employer has a duty to deduct pay as you earn (PAYE) tax and Sars can’t allocate this without a corresponding tax number.
Even if you won’t appear on any payroll because you are self-employed or work as an independent consultant, you should have a tax number and file returns.
Flying below Sars’s radar as an independent contractor will come back to bite you at some point; operating without a tax number will seem expedient only until you realise that you can’t function properly in our financial system without one.
For example, you need to provide a tax number to join a retirement annuity fund, to open a stockbroking account, to invest in a unit trust, or to apply for a property loan. The retirement annuity provider needs your tax number to apply for a tax directive on any lump sum payouts. Even if you don’t take a lump sum and purchase a living or guaranteed annuity instead, the annuity provider will require a tax number because they must deduct PAYE from any payments.
Both your stockbroker and unit trust provider must deduct dividend withholding tax earned on share investments and pay this over to the Receiver.
If you plan to invest your money in a savings account only, your bank will forward a copy of the IT3(b) return (a confirmation of the interest you earned for the tax year) to Sars. This is linked to your identity number. If the amounts are material, and there is no corresponding tax number, Sars will follow up.
Alternatively, you may be called upon to provide a tax clearance certificate under certain circumstances, for example as a shareholder in a private company, if you wish to take money offshore in excess of your R1 million annual allowance, or if you plan to go through the financial emigration process.
If your tax affairs are not up to date, or you owe the Receiver money, you will not receive the clearance certificate you need. And if you are in the process of claiming from a retirement fund, Sars will first deduct the amount owing to them. On the other hand, a long-standing filing record will give Sars confidence that you have not evaded taxes.
Stephan Hartzenberg is the product architect at 10X Investments.