It would seem that SARS often prioritises younger taxpayers who are still working and receive a constant flow of income. However for many older South African taxpayers over the age of 65 who have retired or are still working, there are actually quite a few benefits to enjoy.
Firstly at 65 the tax threshold above which you would even begin paying tax is higher, at R99 056 per year (in 2012 it was R93 150). What's more, those taxpayers who are older than 75 years of age get an even bigger break at R110 889 per year (in 2012 it was R104 261). Given the marked advantage of these higher thresholds it would appear SARS is looking out for those already in retirement. With the mandatory retirement age in South Africa sitting at 65 it would hardly be fair for taxpayers to be prejudiced for not being allowed to work anymore by paying more tax on their savings or retirement income. SARS calls these retirement benefits the secondary and tertiary rebates.
Older taxpayers are also allowed a greater interest income exemption of R33 000. This provides further relief as if added to the R99 056 it then actually allows a taxable threshold of R132 056 before tax becomes payable. For those over 75 years of age the interest and tax threshold exemption is greater at R143 889. However SARS are looking at changing this difference for the next tax year to encourage specific types of savings, what these will be we don't know yet so watch this space.
To provide a real life example, it would mean that the income from an investment of R2.5m in a money market account earning about 5% interest per year would be below the taxable threshold. For many taxpayers over the age of 65 and even over 75 years old, this kind of investment would be their only source of income. For the over 75's, income from an investment closer to R2.9m would be tax free.
What is really important is how SARS treats the medical expenses of these taxpayers. Unfortunately at this age medical costs tend to be higher and with this in mind SARS has correctly, in my opinion, allowed ALL medical aid contributions and other medical expenses that aren't paid for by your medical aid to be claimed as a deduction.
With all these advantages in mind, unless you are earning huge amounts of money it would be unlikely that an over 65 taxpayer would be paying tax at all.
Taxpayers who work for a single employer full time pay their taxes to SARS via employee's tax / PAYE. Taxpayers who earn their income in other ways are required to register as provisional taxpayers, this is complicated and becomes a burden on cash flow. Good news is that for those over 65 whose income is only from remuneration, interest, dividends or rent from the letting of fixed property, and less than R120 000 per year, you can avoid the hassle of having to register for provisional tax.
There are several other obscure benefits to being over 65, but these only apply to a small number of cases, while the ones listed above are seen on a day to day basis. So take heart that as you get older, some things do get easier, and you may have more money available to treat yourself with than you think!
This entry was posted in TaxTim's Blog
and tagged Salary / IRP5, Provisional Tax, Medical, Deductions, Rental Income, Retirement, Dividends, Penalties, Tax Threshold.
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