Warning over tax deadlines hitting this week

Provisional taxpayers in South Africa will have until midnight on Thursday, 29 February, to make their second payment for the 2024 tax year – while RAs, tax-free investments and donations are also being tallied.

A provisional taxpayer is any person who receives income other than remuneration. Most salary earners are, therefore, non-provisional taxpayers if they have no other sources of income.

Provisional taxpayers typically have to submit two provisional tax returns during the tax year and then a final tax return of actual figures after tax year-end.

A third payment is optional after the end of the tax year, but before the issuing of the assessment by SARS.

The finalisation of the previous 2022/23 tax year for provisional taxpayers happened at the end of January 2024. The end of the current 2023/24 tax year will be at the end of January 2025.

For the 2023/24 tax year, provisional taxpayers would have already submitted their first provisional tax payment by 31 August 2023, where half the total estimated tax for the full year was to be paid.

The second payment is now due before midnight on 29 February 2024.

• 31 August 2023 – 2023/24 Provisional tax payment 1 (Current year)
• 24 January 2024 – 2022/23 Provisional tax deadline (Previous year)
• 29 February 2024 – 2023/24 Provisional tax payment 2 (Current year)
• January 2025 – 2023/24 Provisional tax deadline (Current year)

Non-provisional taxpayers closed out their tax affairs in October last year, with the new tax season expected to open later in 2024.

Year of Assessment

On top of the provisional tax deadline, 29 February also represents the end of a tax assessment year, which has implications for other tax affairs, such as tax free investments.

This means taxpayers are running out of time to make use of the tax relief offered on retirement annuities (RAs), tax-free investments (TFIs) and Section 18 A donations.

According to fund managers, Coronation, if taxpayers do not make use of these benefits before the end of the assessment period, most will be forfeited (Ie, the benefits are not carried over to the next year of assessment).

The exception to this is Section 18A donations.

RAs and TFIs can improve one’s chances of retiring comfortably, while Section 18A donations are a strategic way to support eligible schools and Public Benefit Organisations (PBOs).

All these incentives have different rules and eligibility:

Tax-free Invesments

Coronation said that all South African residents, including minors, are eligible to invest up to R36,000 per tax year, to a lifetime total of R500,000, in a TFI.

“With a tax-free investment, you don’t pay any local tax on your investment growth that would otherwise be taxed (i.e. interest or other income, dividends tax, or capital gains) for the duration of your investment period,” Coronation said.

“You also don’t pay any local tax when your investment pays out. Just remember not to contribute more than the annual or lifetime limits, as any excess contribution will be taxed at a rate of 40%.

Compound interest also means that the investment has the potential to grow exponentially the longer one stays invested, meaning that one can double the value of their investment.

For instance, if one reaches the R500,000 limit for their child before they turn 14, the value of the investment would be more than double the value of the similar taxable unit trust investment:

Retirement Annuties

A taxpayer can claim a tax deduction for contributions to an RA to a maximum of either 27.5% of taxable income or R350,000 per tax year.

“RAs offer tax savings now, i.e. you pay less tax now because you make contributions with earnings on which you have not paid tax,” said Allan Gray’s Carla Rossouw.

“However, you will pay tax when you retire and draw an income – although this will likely be at a lower rate than your current tax rate. Your tax saving now directly correlates with your marginal tax rate; therefore, the higher your marginal tax rate, the greater the tax saving on your RA contributions before retirement.”

One may have less take-home pay if they increase their RA contributions, but they’ll see a greater tax benefit, with less of their income going to SARS:

A once-off additional contribution can also be made to an RA within a given tax year, ensuring that one maintains a certain level of disposable income over the year.

One also pays no tax on the interest, capital gains or dividends earned while invested.

“Meanwhile, the first R550,000 lump sum you take at retirement is currently tax-free. Iimportantly, this amount includes all previous taxable lump sums received from any other retirement fund or an employer as a severance benefit,” Rossouw said.

Section 18A Donation

Danielle Luwes, Tax Director at Hobbs Sinclair Advisory, said that Section 18A donations are capped at 10% of the taxpayer’s income before other deductions.

Thus, a taxpayer that earns R1 million will be able to claim up to R100,000 as a deduction for their donation.

“Excess amounts beyond this 10% cap can be carried forward to subsequent years, offering flexibility for larger donations,” Luwes said.

It should be noted that the organisation must be approved as a Section 18A entity and that the taxpayer must get a Section 18A tax certificate for the donation.

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