Read on to see this week’s top five burning questions received to our Helpdesk this past week. Hopefully this helps you too as we once again shed light on some common tax issues.
1. Can I claim home office expenses if I started a sole proprietor recently, but I bought small assets, stationery and I have furnished the office space?
A: Yes you can claim the stationery as a deduction but you unfortunately can’t claim an entire deduction for the assets if they cost more than R7000 each and the same with the furniture, please refer to our wear and tear calculator to see what you can depreciate over a few years or if you can write this expense off immediately. You may also be able to claim a percentage of your utilities (i.e electricity, water, rates, etc), rent or mortgage bond finance charges which relates to your home office. You can calculate this portion by working out the square meterage of your home office as a percentage of the floor meterage of your whole house and then multiply your home office costs by this percentage to calculate your home office deduction.
2. I am self-employed, can you tell me which expenses I can claim please? I have a bookkeeping business and I usually claim a deduction for my business travel, home office expenses, depreciation for personal assets (i.e laptop and cell phone). What else can I claim? I buy my clients gifts and pay for their meals at our meetings, can I claim this?
A: Make sure you keep a logbook which details your business mileage as SARS will want proof of this expense. Please refer to our wear and tear calculator to help calculate the depreciation on your laptop and cellphone. Remember you need to estimate your useage between business and personal and then claim accordingly. With regards to your cellphone call costs, you can claim the business usage as an expense too. You can also claim a deduction for the client meetings and the gifts you bought as long as the costs are reasonable and you can justify to SARS that these expenses were incurred in the production of income. Please also read our for further clarification.
3. I worked as an employee for half of the year and then I started freelancing. Do I have to submit two tax returns for the 2019 tax year?
A: As a provisional taxpayer, you need to submit one annual return (ITR12) and 2 provisional tax returns (IRP6) per year. On the IRP6, you need to declare your freelance income as well as the salary that you earned. You then deduct the employee’s tax that you already paid in order to calcuate the tax due on your freelance income. Your 2019 ITR12 will only be due at the end of January 2020. Your first provisional tax return for 2019 was due at the end of August 2018 and the second provisional tax return is due this week on 28 February 2019.
4. I am donating R100 000 to my wife- how does this work with my taxable income? If I earn R800 000 per year, will my tax liability decrease and her liability increase?
A: Donations between spouses are exempt from income tax according to section 56(1)(n) this means that even though your wife is required to declare the R100 000 that you gave her, she needs to declare it under the non-taxable income section on her return and she won’t be taxed on this income. This unfortunately means that you don’t receive a tax deduction and the R100 000 will not be deducted from your income and your tax liability will not be decreased either. Please read more about donations tax here.
5. Is it compulsory to be a provisional tax payer if you have a rental property and receive rental income?
A: If your total taxabe income exceeds the annual tax threshold, which (if you are under 65) is R78 150 for 2019 and your net rental income (i.e rental income less rental related expenses) is more than R30,000 per year then yes, you should register as a provisional taxpayer.You can also work through our decision tree to check if you are a provisional taxpayer or not.