How South Africans can pay less tax without risking SARS penalties
South Africa has some of the highest tax rates in the world, but there are legal methods taxpayers can use to reduce their tax burden and retain more of their income.
With personal income tax rates reaching as high as 45% for individuals earning above R1.8 million, and with the country's tax-to-GDP ratio expected to approach 25% in the coming years, many South Africans are feeling the pressure.
However, in an interview with radio station Kaya 959, Roxanna Naidoo, Head of Global Strategy at Latita Africa, said there are other legal ways South Africans can use to pay less tax.
"I'm a very strong advocate for tax avoidance and how to ensure that you're optimising your tax incentives legally. And there are quite a few ways," Naidoo said.
Naidoo explained that many taxpayers miss out on important deductions simply because they don't fully understand what qualifies.
"So, the tax system actually allows you to reduce your liability. And there are a few mechanisms there, but taxpayers aren't aware of that," she said.
"We know the most common one is your retirement annuity contributions. They are deductible up to a certain limit. Then the second common one, again, is your medical contributions, but also out-of-pocket medical expenses. People forget about those".
She also stressed that out-of-pocket medical expenses can also qualify for tax credits, and business-related travel costs may be deductible.
"That can also qualify for medical tax credits. Then, if you earn commission or you travel for work, you may also qualify to deduct business travel expenses. That's where keeping those receipts comes in as very important, keeping all of those records"
Naidoo also warned taxpayers to be cautious with SARS auto-assessments, which are pre-filled tax returns based on third-party data like employer records and medical aid contributions.
"If you accept the assessment without checking, you risk under-declaring income or even losing out on those deductions that you should be getting.
"Also, if SARS audits you later, and they do this sometimes up to five years down the line, they'll ask you for that documentation. And if you don't have it, they can then reverse deductions and charge penalties and interest. So, always check your assessment before accepting it and keep those records of everything, just in case"
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