A deduction is all the expenditure and allowances that you are allowed to take away from your income before you calculate how much tax you need to pay.
If you’re a salaried employee then you are limited to very few deductions, the most common being: Pension fund, retirement annuity fund, medical aid, depreciation of small assets.
If you own a business then you can deduct most expenses, provided they relate to the business and the income the business earns.
A capital gain is the difference between the base cost (i.e. initial price) of the asset you sold and the proceeds you received for selling this asset. For an individual 33.3% (25%) of this gain is included in the tax payable calculation.
An example of a capital gain would be the difference between the selling price of shares you sold and the amount you paid for them. Alternatively a capital gain is the difference between the selling price and cost price of your holiday home.
Remember that Capital Gains Tax can get quite complicated so look out for a separate blog post entirely devoted to the complexities of Capital Gains Tax.
A rebate is the amount that SARS allows as an effective tax-free portion. This rebate will depend on your age and which rebate you qualify for.
The following rebates applicable to individuals are:
Primary rebate R 11 440
Secondary rebate (for persons 65 years and older) R 6 390
Tertiary rebate (for persons 75 years and older) R 2 130
A credit is an amount that SARS allows to offset any tax you may owe.
Typical examples of tax credits are the newly introduced medical tax credit and foreign tax credits. This applies if you earn income from another country and were taxed in that country.
This is the amount of tax that is owed to SARS for the year of assessment. For salaried employees, from July to November, and for provisional taxpayers, from July to January, you will submit your return and pay any amounts outstanding to SARS. In some cases you may even receive a refund.
TaxTip – a refund and a rebate are two different things!