Interest payable by SARS should be deemed to accrue on date of payment– section 7E of Income Tax Act
When interest is payable by SARS on amounts refundable the taxpayer is obliged to include the amount of interest in the taxpayer’s gross income. Where interest accrues over more than one year of assessment it gives rise to practical difficulties as technically assessments for previous years may have to be reopened to reflect the correct amount of interest that accrued to the taxpayer in respect of the relevant years of assessment.
In order to create certainty and simplify the taxation of interest payable by SARS, the Income Tax Act has been amended to provide that interest payable by SARS only accrues on the date of actual payment. This rule, which applies from 1 March 2018, overrides the general rule that an amount is included in a taxpayer’s gross income at the earlier of receipt or accrual. The effect of this rule is that interest payable by SARS is only included in the recipient’s gross income when the amount is actually paid and not when the taxpayer becomes entitled to it.
Although less material for individuals, this could lead to some differences in treatment for companies and potentially give rise to deferred tax.
Scholarships & Bursaries
Any bona fide scholarship or bursary granted to enable or assist any person to study at a recognised educational or research institution may be exempt from normal tax in terms of section 10(1)(q).
Bursaries or scholarships that are competed for by, or are awarded on merit to non-employees are exempt from normal tax.
A scholarship or bursary granted by an employer to and employee is exempt from normal tax as long as the employee agrees to reimburse the employer if he or she fails to complete his or her studies for reasons other than death, ill-health or injury.
Where a scholarship or bursary is granted to a relative of an employee, the amount will be exempt from normal tax if the following requirements are met:
- The remuneration of the employee in relation to a year of assessment may not exceed R600 000.
The amount that is exempt, is limited to the following:
- R20 000 in respect of grades R to 12.
- R20 000 in respect of a qualification to which an NQF level from 1 up to and including 4 has been allocated.
- R60 000 in respect of a qualification to which an NQF level from 5 up to and including 10 has been allocated (Higher education).
Where an employer grants a bursary to a person with a disability who is a member of the family of an employee in respect of whom the employee is liable for family care and support, the amount will be exempt from normal tax if the following conditions are met:
- The remuneration of the employee in relation to a year of assessment may not exceed R600 000.
The amount that is exempt, is limited to the following:
- R30 000 in respect of grades R to 12.
- R30 000 in respect of a qualification to which an NQF level from 1 up to and including 4 has been allocated.
- R90 000 in respect of a qualification to which an NQF level from 5 up to and including 10 has been allocated (Higher education).
To the extent that a bona fide bursary does not qualify for the exemption, it is taxable in the employee’s hands.
Commission Income
Taxpayers who earns commission income, and who’s commission income represents more than 50% of their total income, are allowed to deduct expenditure and losses actually incurred in the production of income, provided such expenditure and losses are not of a capital nature, in terms of section 11 (a) of the Income Tax Act.”
Allowable Deductions for Commission earning taxpayers are as follows:
- Home Office Expenses
- Entertainment
- Travelling Expenses
- Computer Consumables
- Deemed Private Expenses.
Please follow the link below which will provide more clarity on the requirements for deducting the above expenses: https://showme.co.za/ballito/files/2015/11/11-Nov-2015-Commission-Earners-20152.pdf
NB! Taxpayers should bear in mind that SARS often challenges commission expenses, so it is advisable to keep accurate and complete records. So please retain all documentary proof.
Recognition of Transfer (ROT)
For many of us figuring out your taxes can be a quite a struggle, but when you are running a business it is even more important to keep track of what is going on with your taxes. We know that we aren’t the experts so we asked partners of ours that are! Our friends at Exceed Finance helped us understand the importance of a Recognition of Transfer form and how to complete it.
The purpose of a Recognition of Transfer form (ROT) is for the Receiving Fund / Insurer to confirm that the amount reflected on the tax directive, submitted by the Transferring fund for either the transfer or the purchase of the annuity, was received. A recognition of transfer moves money from one fund to another and the ROT form is sent to the new fund that the money is being transferred to. The signed ROT is returned to the original fund and then the money is transferred.
As of 1 July 2017, the Receiving Fund or the Insurer has to submit the ROT form where a member elected that:
- The full benefit or a portion of the benefit must be transferred to another fund before retirement (ROT01), or
- The full retirement benefit is transferred to a retirement annuity fund on retirement (ROT01), or
- Where the two-thirds or more of the benefit must be used to purchase an annuity or annuities on retirement or by the beneficiary/beneficiaries on death of the member (ROT02).
From middle December 2018 SARS started to send email reminders to Fund administrators / Insurers if a ROT form is still outstanding. Reminders will also be sent where a tax directive application was submitted and a ROT is required and the ROT was not submitted within 20 working days. SARS will also send a sms or email to the taxpayer if the Receiving Fund administrator / Insurer did not submit a ROT form to confirm the amount transferred or used to purchase an annuity. The taxpayer can then contact the fund. When a taxpayer submits his/her annual return and the ROT is not received, the taxpayer’s return will be rejected, with a reject message that the ROT is outstanding.
In cases like this SARS will inform the taxpayer, on submission of his/her return:
- The Receiving Fund or Insurer did not submit the ROT to confirm that the amount indicated on the on the tax directive was received or used to purchase an annuity.
- If the Receiving Fund or Insurer does not submit the ROT within 10 working days SARS will regard the amount on the tax directive as normal income and the amount will be taxable in full.
We hope that this kind of information will help you out so that you can correctly submit all your tax forms. Visit our friends at Exceed if you are still struggling!
