Are you really exempt from filing a tax return?

 

David van Niekerk of Vantage Chartered Accountants advises

In a recent article, we covered the benefits of submitting a tax exemption even if you are exempt, but how do you really know that you are exempt?

Local news agencies announced the change in income threshold with stories exclaiming “Earning below R500,000? You don’t need to submit your tax return.”  In today’s fast-paced media cycle, after reading the headline or skimming through the article, many taxpayers thought this was the sole criterion that needed to be met. There are a few more, unfortunately, and they narrow the applicability quite significantly.

This is important for taxpayers to understand as SARS’s approach to errant taxpayers has become more punitive as they struggle to collect revenue. Penalties and interest on late taxes or non-submission of returns abound, and not complying with your tax obligations could result in a significant financial shock down the line when this unknown debt has grown big enough for SARS to start collection procedures.

The criteria look simple, so why is this more complicated than we think?

The full criteria are listed under point 2.2 in SARS’ Comprehensive Guide to the Income Tax Return for Individuals:

Although a taxpayer still has to register for income tax, he/she is not liable to submit a return for the 2019 year of assessment if he/she does not have any deductions to claim and if his/her gross income consists solely of gross income described in one or more of the following:

  • Remuneration income that, for the full year of assessment is paid or payable from one single source (e.g. one employer); does not exceed R500 000; does not include any allowance or advance (example travel allowance, public office allowance); and employees’ tax has been deducted or withheld in terms of the deduction tables.
  • Interest income from a source in the Republic not exceeding: R23 800 in the case of an individual below the age of 65 years; or R34 500 in the case of an individual 65 or above.
  • Dividends and the individual was a non-resident for the 2019 year of assessment.
  • Amounts received or accrued from a tax-free investment

Please note: If you earned remuneration for foreign services rendered, you are required to submit a return for the 2019 year of assessment (even if the amount is below R500 000).

So, the R500,000 limit doesn’t refer to income, but instead specifically to “remuneration” – that’s a term defined in the fourth schedule to the Income Tax Act and denotes your employment income on which PAYE is calculated.

What is SARS doing to help taxpayers navigate these complexities then?

SARS has indicated that they will help taxpayers in two ways:

Firstly, they’ll notify taxpayers by SMS or email where they are not required to submit a tax return.

Secondly, SARS will issue “simulated assessments” to those taxpayers via SMS, which will confirm the amount of tax due or refundable.  Once issued, taxpayers will know the tax year is done and dusted – and that there’s nothing further to worry about.

There are three very important caveats to the above – often the case with SARS, and taxpayers should not rely on what SARS has said in this instance.

Firstly, the above help offered by SARS is limited to those taxpayer who not only submitted returns in the previous tax year, but who were also not required to do so. Secondly, if you’ve not submitted a tax return in a while, SARS might not have updated contact details, so you might not receive any communication at all, and lastly, SARS has not indicated when they will actually be issuing these simulated assessments.

This narrows SARS’s “magnanimous” commitment to communicate with taxpayers quite significantly.  Taxpayers would do well not to wait around to hear from SARS. The saying “no news is good news,” certainly does not apply when it comes to tax compliance.

So, how can you be sure you are not accruing penalties and are, in fact, tax compliant?

There are a few things taxpayers can do to ensure they remain tax compliant. We know that reading the full comprehensive guide linked below is not going to be your first choice, so here are a few alternatives:

The first is to file your income tax return. There is nothing preventing taxpayers from doing so regardless on your income levels, and SARS has made the process quite simple via e-filing or their mobi app. This will also give you the opportunity to update your contact details and to keep a copy of your return and assessment on file.

The second would be to contact SARS before 4 December 2019 (closing date for filing returns via e-filing or the mobi app) and asking them to confirm the following:

  • Are you required to submit a tax return for the 2019 tax year?
  • Are you tax compliant or is there any return or amount outstanding?
  • Does SARS have the correct contact details for you?

The third option, applicable only to those registered for e-filing, would be to manually request a Tax Clearance Certificate of good standing just to ensure that you are compliant in all areas. If this is not issued, you will know you are non-compliant. This area of e-filing will also show you a dashboard of where any non-compliance lies (non-submission of returns, outstanding debt, failure to register for a tax type, etc).

Lastly, taxpayers can make use of a tax practitioner to verify whether they are compliant or not, or whether they need to submit their returns based on their income and deductions for a particular tax year.

Why should you ensure you are tax compliant?

As indicated above, the penalty regime at SARS is being enforced and is very punitive.  This is the most important aspect to consider (because it impacts your pocket). Communication to taxpayers on outstanding balances has been fractured and unreliable, and we have often seen taxpayers being unaware of penalties and interest accruing on their tax account only to have a big balance due to SARS on investigation.

SARS doesn’t accept “ignorance” as an excuse for non-compliance, and by extension, it expects taxpayers to know everything about the Income Tax Act and the Tax Administration Act when it comes to compliance, or at the very least expects taxpayers to be  pro-active when it comes to meeting their obligations. This is often the point SARS relies on to reject a taxpayer’s request to remit the penalties and interest.

Link to the comprehensive guide on filing your 2019 income tax return:

https://www.sars.gov.za/AllDocs/OpsDocs/Guides/IT-AE-36-G05%20-%20Comprehensive%20Guide%20to%20the%20Income%20Tax%20Return%20for%20Individuals%20-%20External%20Guide.pdf

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