It is not forbidden in South African tax law to minimize your tax payable. The principle of tax structuring forms part of our common law and our Income Tax Act has a section dealing with transactions that are solely entered into for tax evasion.
To understand the importance of proper tax planning, we should first understand what tax planning means. Investopedia describes tax planning as “the analysis of a financial situation or plan from a tax perspective.” They further add that the purpose of tax planning is to ensure tax efficiency.
It is clear to see from the above that tax planning doesn’t start the day you submit your tax return. One can only save on taxes if you consider the tax implication on every transaction and every aspect of your financial situation. When doing tax planning, all the elements of your financial plan must work together in the most tax-efficient way possible.
Tax planning is an essential part of an individual investor’s financial plan. The reduction of tax liability and maximizing the ability to contribute to retirement plans are crucial for success.
Areas of Tax Planning
When doing tax planning, all different areas of your financial situation need to be taken into consideration. This includes structuring the following aspects where applicable to your situation:
- Estate planning
- Capital Gains taxes
- Tax planning for retirement plans
- Corporate Tax planning
- Income tax
- Salary structuring
- International income tax planning
- Dividend/year-end tax planning
Strategies to Follow to Save On Taxes
There are different strategies to follow considering if you are a salary earner, have a small business or if you have investments or are planning your estate.
Some of the best overall advice for individuals is to consider the following aspects –
- Contributing to a retirement fund can help you save on taxes and is a great way to save for your future at the same time.
- Opening a tax-free savings account where your growth or earnings on the initial investment are exempt from tax on the withdrawal.
- Keep a logbook if you receive a travel allowance or drive a company car. You can claim a travel deduction against the taxable fringe benefit which could reduce your tax owed to SARS. Download our travel logbook here.
- If you are a commission earner, claim commission related expenses and business travel. You can claim all expenses you incurred to earn your commission. Remember to keep a logbook to record all of your business travel to claim.
- Be vigilant!
Don’t pay more tax by overlooking simple errors on your tax assessment. Compare tax assessments received, to a provisional calculation prepared before submitting a return. It is also essential to stay up to date with pronouncements from SARS or information from the Budget speech.
Tax Planning Expert Advice
Seeking expert advice is a wise investment in minimising tax and protecting your wealth. If you are looking for strategic tax advice then contact us for help.
We offer a range of tax planning services designed for businesses and individuals.