With the first provisional return still fresh in the minds of taxpayers, we thought it would be a good time to highlight some questions that were asked to our Helpdesk last month. Hopefully our answers will help taxpayers going forward to ensure the second provisional tax submission is smooth sailing – remember it’s the second one that is so important in order to avoid those unwanted SARS penalties. You can read more about these here.
1. How many returns should I file each year if I am a provisional taxpayer?
You are required to file 3 returns i.e. 2 provisional tax returns (IRP6s) and one annual return (ITR12). The reason you need to file the annual return too is because your provisional returns are based on an estimate of your taxable income, while the annual return reflects your actual taxable income. Any provisional payments you have made for the year will be deducted from your final tax liability, which is, calculated when you submit your annual tax return for assessment.
2. Am I exempt from submitting provisional tax if my income is less than R500 000?
The R500 000 threshold to submit an individual tax return is only applicable in very specific cases for salary earning individuals. You can read all about this here.
As a provisional taxpayer, you are definitely required to pay tax on your non-salary income (i.e. freelance income, rental income, business income or investment income.) You can check out our decision tree to see if you qualify as a provisional taxpayer.
3. How do I calculate my estimated taxable income to enter on my IRP6? I earn a salary, interest on investments and rental income.
For an estimate of your taxable salary, you need to take your gross salary and deduct all retirement fund contributions. To work out taxable interest, you take your gross interest less the R23 800 (for under 65 years of age) annual interest exemption. You would then need to work out your net rental income by deducting all rental related expenses (e.g. estate agency fees, interest on bond, etc.) from your gross rental income. You would need to add these three taxable (net) amounts together to arrive at your total estimated taxable income for the year.
4. I am completing the first period provisional return, but I see that there’s an amount which I never paid for the second period last year, can you tell me how to pay that outstanding balance please?
You can pay this amount via eFiling, EFT or at a bank. Please refer to our blog here on making payments to SARS. There should however be interest and penalties added too, therefore please request a statement of your provisional tax account to see the actual amount due by you currently. It is important to ensure you use the correct payment reference number so that SARS can allocate your payment to the correct account and also tax period. This number should appear on your prior year provisional return.
5. Can I deduct your fee on my provisional return? I have freelance income, rental income and a small pension.
Yes, since you earn freelance income you can deduct our fee. Please note, you can also claim any other business expenses you incurred while generating your freelance income.
6. I have extra income, but I don’t know how to calculate the tax due for my 1st payment. Is it just for the 6 months income from March to August? My income fluctuates and I don’t know what I will earn for the rest of the year.
The provisional return that is due in August needs you to estimate your taxable income for the entire year until the next year February, but you are only required to pay tax on half of the income in August. This means that if you earned freelance income from March to August and it was R105 000 for these 6 months, you need to declare your income on the first period provisional tax return of R210 000 so that you only pay tax on the R105 000 at the end of August.
7. I sold an investment property in January and have a large capital gain. Do I need to include this gain in my provisional return or do I only declare in my tax return?
Yes, you would need to include the taxable portion of this gain in your provisional return. You can work this out by taking proceeds less base cost, less the R40 000 annual exclusion and then working out 40% of this amount which must be included in your estimate of taxable income. There is a field on the IRP6 for unusual or infrequent amounts and you would need to enter the taxable portion of the gain there.
8. I sold a property and earned a large capital gain. I am a salaried employee – do I need to register as a provisional taxpayer now in order to pay the capital gains tax or can it wait until I file my annual return?
Since you are not currently registered as a provisional taxpayer, you don’t need to do so for this once off event. You can declare the capital gain in your ITR12.
9. How do I de-register as a Provisional Taxpayer?
You can do this on eFiling by going to the Home Tab and clicking Tax Types and de-registering there. This will mean you only need to submit an annual return each year and no longer provisional returns.
10. I earn a salary and recently started to freelance on the side. Does this make me a provisional taxpayer even though I earn a salary too?
If you earn income from running your own business, you will always be a provisional taxpayer, even if you also earn a salary.
11. My business is running at a loss, do I need to submit a provisional tax return?
You do, but you would submit a nil return, which reflects zero estimated taxable income and tax.
12. I am a salaried employee and earn rental income of approximately R28 000 (before expenses) as well as R20 000 investment income annually. Do I need to register as a provisional taxpayer?
No, since your taxable rental income (i.e. rental income less expenses) and your taxable interest (i.e. R20 000 – annual interest exemption of R23 800) both fall below the R30 000 threshold, you don’ t qualify as a provisional taxpayer.