When Don’t You Need to File a Tax Return

It’s tax filing season and even if you are not required to file for tax, you will still need a tax number. So, when don’t you need to file a tax return and why is your tax number important?

You will not be required to file for tax if:

  1. Your annual income is below the R500 000 tax filing threshold 
  2. For the full tax year, you only received an income from one employer
  3. You have received no other income like a car allowance, rental income, income from another job and so on.
  4. You are not claiming for any additional deductions like travel expenses, medical costs etc. 

However, even if you don’t need to file for tax, there are other reasons as to why you may want to engage with the taxman. 

Firstly, providing your tax number is part of the payroll take on process as your employer has a duty to deduct to PAYE tax and without a tax number, SARS are not able to allocate this to you.

If you are self-employed or work as an independent consultant, you should still have a tax number and file returns. 

If you need to get your tax number still, then you will just need to visit your local SARS branch with your ID and proof of residence. If you are employed full time and are not aware of your tax number, then it is possible that your employer has applied for it on your behalf. 

Without a tax number, you are not able to function properly in the financial system. This is because you will need to provide a tax number to open a stock brokering account, join an annuity fund, to apply for a property loan or to invest in a unit trust. 

If you only plan to invest your money into a savings account then your bank will forward a copy of the IT3(b) return, which is a confirmation of the interest that you earned for the tax year to SARS. This is then linked to your ID number. SARS will follow up if the amounts are material and there is no corresponding tax number. 

Also, under certain circumstance, you might be required to provide a Tax Clearance Certificate. This may occur if you plan to undergo the financial emigration process, if you are a shareholder in a private company or if you want to take money offshore that is more than the annual allowance of R1 million.

Just because you take your money offshore, it doesn’t mean that you don’t need a tax number. You will need to provide your tax number for your country of residence if you plan to open a bank account elsewhere, according to the Organisation for Economic Co-operation and Development’s Automatic Exchange of Information agreement.

Having a Complete Tax Record Goes a Long Way

If you only apply for a tax number when you need it then you could cause suspicion as it could lead to queries and an investigation, which could result in sanctions and penalties. This will further delay your application. 

If your tax affairs are not up to date or if you owe the receiver money, then you will not receive the clearance certificate you need. If you are in the process of claiming from a retirement fund, then SARS will take the amount owing to them. However, if you have a longstanding filing record then SARS will have confidence that you have not dodged taxes in the past. 

Keep a Record

You should be aware that SARS requires you to keep records for a minimum of five years, from the date of submission to the end of the 5thtax period. 

Even if you meet the requirements for exemption and are not required to submit a return, SARS is still able to request an audit of any or all your tax affairs.

Make sure you then have a record of any claimed expenses, income, medical aid, retirement and investment tax certificates. Keep them safe and make sure you understand them. 

Article Source: https://businesstech.co.za/news/business/327601/when-you-are-not-required-to-file-a-tax-return/