IMPORTANT TAX UPDATE: THRESHOLDS AND FILING SEASON. WHAT THE R500,000 INCOME TAX THRESHOLD ACTUALLY MEANS AND WHY YOU MUST UNDERSTAND IT.

fhbc_rocketmailer_nov_01_13An Introduction

The South African Revenue Service (SARS) announced that tax filing threshold has increased to R500,000 (previously R350,000) on 6 June 2019.

It is very important to take note that this threshold is not a “tax threshold”, but a “tax filing threshold”.  What is the difference?  When we refer to a tax threshold it means that persons earning income below the different available income tax thresholds, do not have to pay income tax.  On the other hand, people earning income below the tax filing threshold (the R500,000) does not have to submit a tax return to SARS.  This does not mean that these persons do not have to pay tax.  Have a look at the prerequisites, which need to be complied with in order to qualify for the tax filing threshold:

Important: you do not have to submit a tax return if you satisfy ALL the below requirements:

  1. If your total employment income/salary for the year (March 2018 to February 2019) before tax (gross income) was not more than R500 000; and 
  2. You only received employment income/salary for the full year of assessment (March 2018 to February 2019) from one employer/source (please note that if you changed jobs during the tax year, or have more than one employer or income source, you must file a return.); and 
  3. You have no car allowance/company car/travel allowance or other income (e.g. rental income or income from a side business like, for example, selling Tupperware); and 
  4. You are not claiming tax related deductions/rebates (e.g. medical expenses, retirement annuity contributions other than pension contributions made by your employer);
  5. Employees tax (i.e. PAYE) has been deducted or withheld by your Employer.

Why do we classify the filing season threshold as such an important issue?

The filing threshold plays quite a crucial part in the world of tax, especially because of the fact that, if you misunderstand or misinterpret the working of the filing threshold, you are metaphorically speaking, opening the door to receiving penalties.  Thus, in order to not receive penalties from SARS, it is of utmost importance to make sure that you satisfy ALL the requirements for the R500,000 filing threshold, before you make use of it by not filing a tax return.

Does this mean that SARS simply ignores your income and the tax that you paid?

No, definitely not.  Ever heard of a simulated assessment?   Based on the criteria for persons who are not required to submit returns, SARS has identified a group of taxpayers to be auto assessed for the 2019 year of assessment, this assessment is called a “simulated assessment” which is done by SARS.  This group of taxpayers, are taxpayers who were not required to submit a return in the preceding year of assessment but still chose to do so.  This process is proposed to enable quick and easy tax return submissions for taxpayers in this group.

How does a simulated assessment work?

If you fall within this category, you will receive a SMS from SARS notifying you of the following:

  • That SARS has prepared a simulated tax calculation for you based on available information,
  • The amount due to or by you based on the simulated tax calculation, and that
  • You are not required to file a tax return unless your financial circumstances have changed during the year of assessment.

The way forward, in this regard – if you wish to accept the simulated tax calculation, the return will be processed as per the existing return submission process and a notice of assessment will be issued (you do not have to inform SARS of your acceptance).  Remember, the simulated assessment process will not be available after the filing season has closed as it is assumed that you have opted not to file a return.

If you, however, do not agree with the simulated tax assessment, you will have to file your tax return yourself.  By filing your tax return, you will have to provide SARS with the correct information, which will override the simulated tax return.

When must your tax return be submitted?

The different tax filing dates are listed below:

  • eFiling opens on 1 July and closes on 4 December 2019.
  • Branch Filing opens on 1 August and closes on 31 October 2019.
  • Provisional taxpayers have until 31 January 2020 to file via eFiling.

Please do seek tax advice as soon as possible, should you have any questions and make sure that you file your return on time.

In summary:

Although taxpayers still have to register for income tax, they will not be liable to submit a tax return for the 2019 year of assessment if they do not have:

  • any deductions to claim and
  • if their gross income consists solely of gross income described in one or more of the following:
Employment Income/Remuneration
It includes remuneration that:
Interest Income Dividends Income
  • Is 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 prescribed by the Commissioner.
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 aged 65 or above the age of 65 years; or
  • R23 800 in the case of the estate of a deceased person.
Dividend income if the individual was a non-resident for the 2019 year of assessment.

 

Other Income What about foreign employment income received?
  • Amounts received or accrued from a tax-free investment.

 

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).

 

Once again, we want to emphasise the importance of making sure whether you do indeed fall within the ambit of the R500,000 filing threshold, before you opt to not file a return.  You are welcome to contact our Tax Compliance department for assistance in this regard.

Also, if you wish to skip the long ques at your nearest SARS office, our Tax Compliance department is equipped and organised to submit your return on your behalf via eFiling.

If you have any enquiries, please contact Chantél van der Merwe at c.vandermerwe@fhbc.co.za

Source Reference:

SARS External Guide:
Comprehensive Guide to The Income Tax Return for Individuals

SARS Website:
1. https://www.sars.gov.za/Media/MediaReleases/Pages/6-June-2019—Clarification-%E2%80%93-Filing-threshold-and-dates.aspx
2. https://www.sars.gov.za/TaxTypes/PIT/Pages/default.aspx

Fin24 Website:
https://www.fin24.com/Companies/Financial-Services/just-in-sars-lifts-tax-return-threshold-from-r350-000-to-r500-000-20190604