Tax season started on 1 July, and while many of us don’t enjoy the process, it’s something we just have to get done. Whether you run a business and need to submit a tax return based on your business transactions, or need to submit your tax return purely on an individual basis, there are in fact some ways to make the most of it. To help you get through the process, here are three ways which could help you save money on your taxes.
Make use of a tax-free investment account
For those who aren’t aware, in 2015, Government introduced regulations for authorised service providers to offer tax-free investment products to encourage more South Africans to save. Individuals can access tax-free savings accounts, where up to R30 000 per year and no more than R500 000 over a lifetime will not be taxed. If an individual exceeds these limits they will then be subject to a 40% tax on all proceeds, including interest income, capital gains and dividends.
Tax-free investments include retirement annuities, unit trusts, exchange traded funds (ETFs) and tax-free deposit accounts. Putting your money into one or more of these accounts, according to your savings needs, may allow you to reduce more costs than you would with a taxed savings account.
Make use of the tax deduction for wear and tear
If you use your personal computer, or cell phone for work purposes, you can deduct an amount of the total value of the item over a number of years when submitting your tax returns. The amount you deduct will reduce how much tax you owe, due to wear and tear on the item/s you use to bring in an income. If the item you use costs R7 000 or less when purchased, you can deduct the full amount in your tax submission at once.
If you don’t work for yourself, ensure you have a written letter from your employer stating that you use the relevant personal assets for work purposes, and you’ll be able to reduce the tax you owe. To figure out how much you can reduce your tax by each year on your work related items, use the Tax Tim calculator.
Reduce your tax by investing in research and development
If you’re a business owner, and you spend an amount of your income on research and development of science or technology, you can claim what you have spent back when submitting your tax return. In this way you’re both investing in your business and saving money. To be eligible for this tax benefit, you must register with the Department of Science and Technology each year.
The main purpose of this benefit is to incentivize business owners to spend money on and inevitably invest in research and development. So if you’re holding back on spending your profit on research and development due to the costs, you can end up saving money on these activities if you register with the department.
With tax time already on our doorstep, there’s no time like the present to ensure you know how to get the most out of the process. While the Rand continues to weaken, with these tips in mind, you can reduce the amount of tax you pay in the long-term.
Disclaimer: This article is provided for informational purposes only and should not be construed as financial or legal advice. Hippo.co.za and its affiliates cannot be held responsible for any damages or losses that may occur as a result of this article.