+27 (0)12 004 0578 sales@bevolve.co.za
Financial Planning Checklist for 2022

Financial Planning Checklist for 2022

Jan 27, 2022

Given the unusual time we all find ourselves in, you should ask yourself questions such as: “Do I have a financial plan?”, “Am I on track to long-term financial security?”, and “What can I change in 2022?” To revolutionise your finances, it may be more beneficial to adopt a more structured approach, by means of a financial checklist. Doing so will help ease your mind and allow you to focus on the year ahead.

Questions to ask . . .

“Do I have a financial plan?”

“What can I change in 2022?”

A financial checklist is an excellent tool to check on how you are progressing towards your goals and to also help identify any specific areas you might need to focus on in the immediate future. Points to consider for 2022 are:

1. Make a budget and review your spending.

Whether you use a software program such as Excel or pen and paper, you need to know where your money is going. Break down your expenses into categories – like home, daily living, transportation and identify where you can scale back. Any month you spend less than budgeted, transfer the difference into savings.

Z

2. Check your credit status

To get closer to paying off your debt, cut down on expenses, even if it’s just temporary, and putting that money toward your debt. You can also obtain a free copy of your credit report. It is important to know your credit score and to confirm the details listed. You also have the right to challenge any information on the report to ensure that your credit report is accurate.

3. Tax planning

While you have to accept that you will have to pay tax at some point, the South African government has put numerous incentives in place to encourage us to invest for the long term, while saving on our tax bill. Now is the perfect time to start collecting important tax documents and receipts.

4. Review your insurance policies

Take a look at your home, vehicle and life insurance policies to ensure they still meet your needs. Check to see if you have enough coverage or if you need to adjust your deductibles. Shop around to make sure you’re still getting the best deal. Is there a less expensive policy with similar coverage? Are you taking advantage of all the discounts offered to you by your insurance providers?

5. Evaluate your portfolio

Your portfolio should reflect investment objectives that are appropriate for your current life stage. As your life changes, your investments and financial portfolio might need another review and alterations. Meet with your financial planner to see how changes in your life may have impacted your overall financial portfolio.

6. Plan Your Charitable Contributions for 2021

Formalising your charitable giving also reduces the chance of your future financial plans being derailed. It is counterintuitive to give beyond what is realistically affordable, and building your charitable pursuits into your overall planning will allow you to give confidently and consistently into the future.

7. Check Your Retirement Contributions

The start of a new year is also a perfect time to reevaluate your retirement contributions. If you aren’t taking full advantage of an employer match, consider increasing your contributions. Even if the increase is small, at least you’re making progress in the right direction.

TAX NON-COMPLIANCE

TAX NON-COMPLIANCE

Nov 26, 2021

AVOID Criminal Sanctions

According to Section 234, non-compliant taxpayers may be subject to criminal sanctions. In this regard, the list of criminal offences is set out extensively in Section 234 and upon being found guilty, taxpayers face prosecution, conviction, and subsequent imprisonment (of up to two years) or a fine. Owing to the range of criminal offences envisaged in Section 234, there is little to no leeway for taxpayers, even in the instance of unintentional non-compliance.

SARS is on a journey to foster a culture of voluntary compliance.

Following the removal of the element of willful conduct (i.e. intention) in respect of a number of small non-compliance matters, individuals, companies and their directors should be attentive of their exposure to potential criminal liability for the smallest tax transgressions.

Subject to Imprisonment

Prior to the latest tax amendment legislation becoming final, a taxpayer could only be liable for a fine or subject to imprisonment if the relevant transgression was committed “willfully and without just cause”. The defense of ignorance previously used by taxpayers will no longer be sufficient in respect of the less serious non-compliance offences in which “negligence” will now also trigger potential criminal liability.

“SARS will make it hard and costly for any taxpayer who willfully and intentionally seeks to break the law as we expect every taxpayer to meet their obligations and pay their fair share of tax,” it said

To give a few examples, non-compliance that would be criminalised include some of a serious nature but also include,

  • ZFailure to notify SARS of a change in address
  • ZFailure to notify SARS of a change in representative taxpayer and
  • ZMaking an error on a tax return.
Need Help?

It is widely accepted that when dealing with tax administration, many taxpayers make errors which are not deliberate, or fail to comply with certain requirements as a result of a mere oversight. Through Section 234, the scope of criminal prosecution has been broadened to include conduct which is not only wilful but may be as a result of carelessness on the taxpayer’s behalf. Whilst the maladministration of a taxpayer’s tax affairs due to carelessness is not to be taken lightly as it will have far-reaching consequences and possible criminal prosecution.

Whilst the parameters of tax non-compliance have become a point of contention, taxpayers must take cognizance of the realities of tax administration and rather than potentially unintentionally subjecting themselves to criminal prosecution, take purposeful and careful steps to order their tax affairs and seek the guidance of skilled practitioners where necessary.

 If you, as a taxpayer, are unsure of your tax position, we advise you to seek professional advice from qualified Tax Practitioners, such as ourselves.

Rental Income and your Tax Return

Rental Income and your Tax Return

Oct 25, 2021

What is rental income?

If an individual rents out a property (generally residential accommodation) such as holiday homes, guesthouses, garden flats or dwelling houses and receives rental income, the amount received will be subject to income tax.

How is tax calculated on rental income?

The rental income you receive should be added to any other income you may have, but will also be reduced by certain permissible expenses incurred.

Can the rental income be reduced?

Yes, the rental income may be reduced by any permissible expenses incurred during the period that the property was let. Only expenses incurred in the production of that rental income can be claimed. Any capital and/or private expenses won’t be allowed as a deduction. 

Expenses that may be deducted from rental income could include:

  • ZRates and taxes
  • ZBond interest
  • ZAdvertisements
  • ZAgency fees of estate agents
  • ZInsurance*
  • ZGarden services
  • ZRepairs in respect of the area let and
  • ZSecurity and property levies

*  (only homeowner’s insurance and not insurance for household contents or bond insurance)

Non-Deductible Expenses:

Only expenses relating to the rental of the property may be deducted for tax purposes. This means that SARS will not consider outlay on capital and private items as deductible expenses.

Although maintenance and repairs expenses may be deducted from the rental income, the cost of improvements are considered capital expenses. They will be added to the value of the property.

 If you sell the rental property, however, the improvement costs will be seen as an expense that will lower your capital gain on the property. This will reduce the capital gains tax (CGT) payable to SARS on the sale of the property.

Need Help?

What if the expenses exceed the rental income?
Should the expenses exceed the rental income, the loss should be available for set-off against other income earned by the individual, provided that the loss is not “ring-fenced” in terms of prevailing anti-avoidance provisions. For more information, see our Guide on ring-fencing of assessed losses arising from trade conducted by individuals.

The individual must effectively be able to satisfy SARS that he or she is carrying on a bona fide trade through the rental of his or her property.

Trying to figure out tax deductibles can be a difficult and overwhelming task. If you’re ever unsure about your tax return, it’s best to consult with a professional financial adviser or tax consultant who can guide you through the process. Contact us on www.bevolve.co.za to assist.

Working from home and claiming for home office deductions?

Working from home and claiming for home office deductions?

Sep 28, 2021

Business Evolution Account and Financial Administration

You could be eligible to claim for home office expenses if

You are an employee who works from home and has set aside a room to be occupied for the purpose of employment. Provided that you meet the requirements set by SARS, you may be allowed to deduct certain home office expenses for tax purposes calculated on a pro-rata basis.

Since working from home has become far more prevalent, SARS anticipated an influx of these claims and confirmed that they will work hard to detect non-compliance. It is their intention to give the honest taxpayer a seamless and pleasant experience, but for the dishonest or negligent taxpayer it will be hard and even costly if they are non-compliant.

What are the requirements that need to be met?

To qualify to claim home office expenses, SARS has set out four requirements that need to be met:

k

Empoyer Letter

The employer must allow the employee to work from home i.e employee must have a letter from the employer stating such.

Updated Details & Equipment

You must ensure your company details are up to date.

The office must be specifically equipped for the employee’s trade, i.e., it must be specially fitted with the relevant instruments, tools, and equipment required for the employee to perform his or her work.

W

Designated Area

The employee must have an area of their home which is used exclusively for this purpose. For example, employees who meet clients in their dining room at home would not qualify. A separate office, which is used specifically for the employee’s work, must be maintained to qualify for the deduction.

If you are still unsure about the requirement criteria, SARS published a very user-friendly questionnaire that can be accessed here: 

SARS Questionnaire

What expenses can be deducted?

Firstly, one needs to look at the taxpayer’s remuneration structure to see whether he/she: 

– is a “commission earner” i.e. takes more than 50% of their total remuneration from commission or some other variable form which is based on their work performance or,
– is a normal salaried employee with variable payments/commission making up less than 50% of their total remuneration.

The first group (i.e. “commission earners”) can deduct rent, interest on bond, repairs to the premises, rates and taxes, cleaning, wear and tear and all other expenses relating to their house as well as other commission related business expenses (e.g. internet, telephone, stationery, repairs to printer etc.).

The second group (i.e. salaried employees with variable payments/commission making up less than 50% of their total remuneration) can deduct rent, interest on bond, repairs to the premises, rates and taxes, cleaning, wear and tear and all other expenses relating to their house only.

How to calculate the home office deduction

One needs to work out the total square meterage of the home office in relation to the total square meterage of the house, and then convert this to a percentage.

One then applies this percentage to the home office expenditure in order to calculate the portion, which is deductible.

What constitutes home office expenditure?

b

Section 23(b)

Typically, the type of home office expenditure referred to in section 23(b), namely: 

  • rent of the premises;
  • cost of repairs to the premises; and
  • Expenses in connection with the premises.
b

Section 23(m)

In addition to these expenses, other typical home office expenditure that may qualify for deduction in terms of section 23(m) include: 

  • Phones;
  • Internet;
  • Stationery;
  • Rates and taxes;
  • Cleaning;
  • Office equipment; and
  • Wear-and-tear.

Generally, relatively few employees who earn a salary income only, or no/limited commission income, would qualify for a tax deduction for home office expenses. You should therefore only claim such a tax deduction if you are able to demonstrate to SARS that you have met the above requirements.

SARS advises individual taxpayers to carefully consider any claim for home office expenses before filing their Income Tax Returns. Taxpayers who claim the deduction, and especially those who claim it for the first time, will be subjected to an audit. Non-compliers will be detected and will not qualify for the deduction.