February is the time to tidy up your taxes.
I have to smile when I hear the month of February being called the "month of Love!". For me it is also the "month of Tax! " 28 February is the end of the tax year so this is the month to take advantage of any tax breaks still available to us taxpayers.
Things to consider include:
• Lump sum Retirement Annuity (RA) contribution
If you have earned income during the year on which no pension or provident fund contributions have been made (for example, bonuses, commission, travel allowance, annuity income), you are entitled to contribute up to 15% of this amount into a Retirement Annuity (R.A.), and to claim a tax deduction on this amount when you submit your annual tax return to SARS.A R.A. had a number of tax advantages as you are able to claim a this tax deduction on your contributions, benefit from tax exempt investment growth within the R.A and also, you are removing the value or your R.A. investment your estate for estate duty and executor's fees purposes. A financial planner can give you more details on how to make the most of these tax advantages.
• Annual donations
Donations between spouses are tax-free. In addition, every taxpayer is entitled to donate up to R100,000 per annum to anybody they wish, so, between a husband and wife they can therefore donate R100,000 each per annum (R200,000 in total), and remove these amounts from their personal estates. However, it is essential to speak to your financial planner before going ahead and making these donations, to ensure that they do not adversely affect your financial plan.
• Capital gains calculations
Every taxpayer is entitled to an annual exclusion of R30,000 on any capital gain made during the tax year, and one-third of the balance of the capital gain is then added to your taxable income. If you have a share portfolio, now is an ideal time if you wish to make any changes, offsetting losses against gains.If you have sold your private residence during the tax year, there is an annual exclusion of R2 million of any gain you may have made.This exclusion does not apply to a holiday home or rental property, only your primary residence. There are other capital gains exemptions that are applicable to small businesses. For further information on this, chat to your financial planner.
A great financial plan ensures that your money is invested in such a way as to take advantage of every concession – and this time of the year is the perfect time to make sure you do so. Your financial planner is there to help you if you are unsure – so make the most of your available tax savings.
News supplied by JANINE PLAYER CFP® Financial Planner and Employee Benefits Consultant.