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Before you accept your SARS Auto Assessments READ THIS

Before you accept your SARS Auto Assessments READ THIS

SARS has started sending auto-assessments out.

What does this mean?

Well, you do not have submit your tax return, but you do have to accept the auto-assessment. 330,000 taxpayers out of 3- million to whom SARS has sent an SMS to notify them of the auto-assessment of their tax have already accepted these assessments. To accept your auto-assessment login in to the MobiApp or e-filing platform.

STOP: DON’T “Click Accept” just yet, even if it looks like you are owed a tempting refund.

Check your Assessment

Before agreeing to the auto-assessment, you need to be sure that all your income and deductions are recorded.

Has SARS included all your income and deductions?

Has all your income been included:

  • Rental Income
  • Side hustle Income 🙊

And more importantly has all your deductions been included that SARS may not be aware of, which you need to bring to their intention, like:

  • Rental expenses
  • Side hustle expenses
  • Your contributions towards retirement funds are deductible
  • Medical contributions to medical aids may be pre-populated, but out of pockets ie medical cost not recovered from your medical may qualify you for additional credit.
  • Donations to PBOs – If you’re a generous soul who likes to support a charity, you’ll be pleased to know that any donations given to registered Public Benefit Organisations ie organisations that issue a S18A certificate are tax deductible.
  • Depreciation on personal devices – The work environment is changing and these days many salaried employees make use of personal devices for work purposes (e.g laptops or cellphones). If you’re using a device purchased and maintained in your personal capacity for work, you may be able to claim the depreciation on the device as a tax deduction
  • Home Office Expenses – If you’re a salaried employee but work mainly from home in a specifically dedicated space, e.g. a study or office area not used for any other purpose, you’re able to claim certain running costs associated with that space. These may include:
    • Rent
    • Interest on your mortgage bond
    • Cleaning
    • Rates
    • Electricity
    • Maintenance (repairs – note: not cosmetic improvements)
    • Wear and tear on office equipment
  • Travel Claim – There are a few specific circumstances where you can claim your business mileage

How to check?

Don’t check from the assessment, choose ‘Edit Return’ to get to the ‘Returns Issued’ page. If you need to edit the return you can do so on the MobiApp or e-filing platform.

How long will SARS take to Assess your return?

Sars Commissioner Edward Kieswetter says 8 out of 10 taxpayers will get an assessment in less than three seconds and 7 out of 10 due a refund should get the money within 72 hours. Griffiths says early indications are that taxpayers who have travel allowances, make tax deductible donations, or who have medical expenses over and above those that are reflected on their medical scheme certificates, should definitely not accept the auto-assessments. 

Can you correct your return after you accept the auto-assessment?

Yes, you can.

If you accept the auto-assessment then realise you omitted to claim a deduction, you can use the “Request Correction” facility on efiling or the MobiApp and resubmit the return with the full information. 

Will Sars know if I do not declare some income or provide false information?

If your auto-assessment does not include some income you have earned, you may think that accepting it means Sars is unlikely to find out about that income. The Income Tax Act makes it very clear that the burden of a full declaration is on you.

The wheels of Sars turn slowly, but thoroughly, it some cases it overturns 😥.  So do not think you can hide income from SARS.

More than 11% of the returns submitted are being subjected to an audit. This is where Sars requests documents to prove your claims. Kieswetter says Sars has significantly stepped up its ability to detect fraud, so you should not expect to get away with putting in any false deductions or under-declaring your income.The revenue service uses a broad variety of data from financial institutions, the vehicle register, population register, companies register and other asset registers, and is increasingly broadening these sources of data to ensure it gets the right amount of tax from you, he says. Sars also gets information about South Africans who have money offshore through an Organisation for Economic Co-operation and Development programme, he says.

Make sure to Get your IRP5 from your employer or check your return for information related to your employment

If your employer has not filed your salary information with Sars, this may hold your return up. Only 57% of employers have filed salary information with SARS. If your Employer has not done so, your auto assessment will be incorrect.

When does my return have to filed or assessment accepted?

Ordinary taxpayers will have until November 16 to e-File their returns, while provisional taxpayers will have until January 31 2021. 

TERS – Clarity Amidst The Confusion

TERS – Clarity Amidst The Confusion

The UIF Commissioner, Mr Teboho Maruping, has confirmed that the UIF will be assisting employers and employees who are affected by the COVID-19 pandemic where employers may not be able to pay employees by implementing the COVID-19 TERS.

When legislation was updated, this created confusion and uncertainty amongst business owners as to what could be claimed and how the application should be made.
Following consultations by the South Institute of Chartered Accountants [SAICA] with the UIF Commissioner some clarity has been obtained for businesses and their members.

Employers can now claim the UIF TERS benefit on behalf of their employees:

  1. Who have either lost income or
  2. have been required to take annual leave in terms of section 22(10) of the Basic Conditions of Employment Act.

Points of clarity

Dedicated Bank Account

The update in legislation has not removed the requirement for a dedicated bank account, however the practical application has been to favour a separate employer account in order to apply the set-off or the respective employee accounts.

We have been made aware of a case where the amount was paid into the business bank account and for some reason or the other the amount was paid out instead of going to the employees. The business has to be accountable for the funds and may be subjected to harsh penalties or criminal investigation.

Annual Leave

Employers who required employees to take annual leave can now set off any amount received from the UIF in terms of the COVID-19 benefit against the amount paid to the employee in respect of annual leave, provided that the employee is credited with the proportionate entitlement to paid annual leave in future.

Setting-off UIF Benefits

Employers can also pay employees based on the directive and set off the payments with the UIF benefit received.
Benefit > R3500
There are two further important principles:

  1. Should the amount of the benefit to which an employee is entitled by applying the UIF’s formula be less than R3 500, the employee will receive the minimum of R3 500.
  2. For employees earning above the threshold amount of R17 712 per month, the benefit that may be received is the maximum of 38% of R17 712, which is R6 638.40.

Salaries above R17 712

Previously the UIF TERS benefits calculation stated that where the employer’s top-up and the UIF TERS benefit exceeded R17 712 the employee did not qualify for a TERS benefit.
The UIF will now pay additional benefits even if the employer has paid the employee a certain portion of his or her salary, provided that the total amount paid to the employee does not exceed his or her normal salary and not the R17712 as previously stated. I.e. the amount paid + benefit is not greater than the employee’s salary during normal times.

UIF confirmed that on the wording of the Directive prior to this correction, the benefit was calculated up to the threshold amount of R17 712 (and not the employee’s actual remuneration). Thus, if the employer’s top-up and the benefit exceeded the amount of R17 712 the employee would not have qualified for a TERS benefit.

South African Institute of Chartered Accountants were informed that the UIF will automatically re-calculate the benefits of employees whose applications were rejected on this basis.

The UIF has confirmed the calculations of UIF TERS benefits, and is indicated in the four examples below:

[See TERS Calculator Below]

Example 1

For a salary of R6 000 where the employer does not pay the employee a salary, the UIF TERS benefit for 30 days is R2 715
As the UIF TERS benefit of R2 715 is below the National Minimum Wage of R3 500, employee will be paid R3 500.

Example 2

For a salary of R6 000 where the employer pays the employee a partial salary of R2 800, the UIF TERS benefit for 30 days is R2 715
As the UIF TERS benefit R2 715 is below the National Minimum Wage of R3 500, the employee will be paid R3 500.
But as the employer has paid the employee R2 800, therefor, UIF will only contribute R3 200 because the employee can only receive an amount up to normal salary of R6 000.

Example 3

For a salary of R18 640 where the employer does not pay the employee a salary, the UIF TERS benefit for 30 days is R6 638.33
Employee will be paid R6 638.33.

Example 4

For a salary of R18 640 where the employer pays the employee a partial salary of R9 320 (50%), the UIF TERS benefit for 30 days is R6 638.33
As the employee received R9 320, UIF will top-up the payment of R9 320 with R6 638.33 and the employee would receive a total of R15 958.33 which is still less than the normal remuneration of R18 640.
Use the calculator below to calculate the TERS benefit or the amount to pay your employee in order to get the maximum benefit per employee.

Practical Accounting Consideration For Change in The Vat Rate

Practical Accounting Consideration For Change in The Vat Rate

Background

The Minister of Finance announced in his Budget Speech of 21 February 2018 that the standard rate of VAT will increase from the current 14% to 15% with effect from 1 April 2018.

The VAT rate to apply depends on the time of supply rules

In simple terms, this is the date on which the transaction is deemed to occur according to the VAT Act. The general time of supply rule is the earlier of when

  • an invoice is issued or
  • payment is received.

For most transactions the general time of supply rule will apply. However, some transactions have special time of supply rules. Some examples include

  • supplies between connected persons,
  • fixed property transactions and
  • supplies made under instalment credit agreements.

In addition, some rate specific rules could apply when there is a change in the VAT rate. Most transactions which occur on or after 1 April 2018 will be subject to VAT at the new rate of 15% unless a special time of supply rule or a rate specific rule applies.

The rate specific transitional rules will be dealt with in another article, we’ll keep you posted.

Practical Considerations

Has your accounting system been adapted to the new rate. More specifically are you invoicing customers at 15% rather than 14%. Get this wrong and SARS with slap you with penalties and interest.

Can your accounting system cope with transition rules or is your bookkeeper aware of these rules to account for transactions correctly.

At what rate should Credit Notes for sales prior to 1 April 2018 be processed.

At what rate should Debit Notes for purchases prior to 1 April 2018 be processed.

At what rate shouldBad Debts that relate to sales prior to 1 April 2018 be processed

VAT Reconciliation should include additional items ie reconciling items to take the above into account and to justify a particular periods VAT Return.

Most off the shelf accounting systems appear to have the above covered.  In- house systems will rely on internal IT staff to make the necessary changes.

Cloud accounting systems tailored to the South African market should have your back, however other systems adapted for our market need to make the changes required to comply.

Billing systems which do not form part of the accounting system will also have to be changed to account for the rate change. E.g. Medical administration systems will have to bill patients at the new rate and deal with credits and other variations as per checklist below.

Checklist to ensure smooth transition

  1. Update your Master files i.e. the file that contains the vat rates;
  2. Update the VAT rate on recurring Invoices;
  3. Update Bank Statement Mapping Rules or bank rules, if any;
  4. Update Quick Entry Rules, if any;
  5. Map the VAT 201 Report in line with your Time of Supply rules, if required by your accounting system.
  6. Make admin staff aware of changes and pay particular attention to transactions that occur after 1 April 2018 which relate to transactions prior to vat change rate date, e.g. Bad debts or credit notes processed after 1 April 2018 for invoices prior to this date; these should be processed at the old rate.
  7. Reconcile VAT at the end of the every vat period to ensure that all transactions have been recorded correctly i.e. at the correct rate, to justify using the old rate to SARS where permitted.

NB: Remember to also change the vat rate on recurring invoices, expenses, orders, etc.

The information and material published on this website is provided for general purposes only and does not constitute legal advice. We make every effort to ensure that the content is updated regularly and to offer the most current and accurate information. Please consult one of our Professional staff on any specific problem or matter. We accept no responsibility for any loss or damage, whether direct or consequential, which may arise from reliance on the information contained in these pages. Please refer to the full terms and conditions on the website.

Residential Property Developers VAT Headache

Residential Property Developers VAT Headache

Background

Developers who build residential units must charge VAT at the standard rate (14%) when selling the units. The developers are entitled to claim VAT on the cost of supplies made to them, for example, building materials, etc.

However, in some cases developers are not able to immediately sell the units which they have built. In those cases the developers often let the property to individuals until they are able to find buyers.

The problem then is that there is a change of use for VAT purposes: the developer who held the units to sell as stock (and raising VAT at the standard rate) now starts using the units to supply a ‘dwelling’ (and raising no VAT as the supply is exempt from VAT).

The effect of that ‘change of use’ is that the developer must account for VAT on the value of the units as if it had sold the units. Naturally, this has adverse cash flow consequences for the developer as it must fund the VAT out of its pocket.

Fortunately, under s18B of the VAT Act, a developer in that position may let the unit for a period of 36 months after concluding the lease without triggering the VAT on the ‘change of use’. If the developer sells the unit during the 36 month period, the developer must account for VAT on the sale at the standard rate. If, however, the developer is not able to sell the unit within 36 months then, at the end of that period, there will be a change of use and the developer will have to account for VAT on the value of the unit as if it had sold the unit, i.e. at market value.

S18B of the VAT Act has been deleted as of 1 January 2018

Unfortunately, the reprieve provided by this section is no longer available. If the units are rented because they cannot be sold a ‘change of use’ is triggered and vat has to be immediately accounted for based on the market value of units sold or saleable.

Let’s look at the numbers

Conclusion

 

  • Don’t rent unsold units
  • Property developers that find themselves in a cash flow squeeze, can approach SARS to pay the VAT amount due in instalments over an agreed period. The developer must be able to satisfy SARS that it has a cash flow problem and is unable to settle the VAT in a single payment, and that its financial position is likely to improve in the short term. SARS may also request the developer to provide suitable security before it agrees to the payment of the VAT in instalments.
  • If the developer has paid the VAT on an unsold unit which is temporarily let and it subsequently manages to sell the unit, then VAT is payable on the total sales consideration; the developer can then deduct the total VAT amount previously paid.

It was hoped that SARS and National Treasury would address the problem in the 2018 National Treasury Budget, unfortunately this did not materialise. Both the New Zealand and Australian tax authorities have successfully addressed this issue, and guidance could be drawn from them to find a suitable solution in a South African context.

Legislation Reference:

  • S18A of the VAT Act
  • S167 of the TAA
  • S168 of the TAA

The information and material published on this website is provided for general purposes only and does not constitute legal advice. We make every effort to ensure that the content is updated regularly and to offer the most current and accurate information. Please consult one of our Professional staff on any specific problem or matter. We accept no responsibility for any loss or damage, whether direct or consequential, which may arise from reliance on the information contained in these pages. Please refer to the full terms and conditions on the website.

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