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The tax year ends on 29 February 2020 and there is still time to pro-actively manage your current and future tax burden. Moore’s national tax advisory team shares some tips for reducing your tax liability, how to prepare for tax year-end and advice for avoiding penalties.
 
Here is our brief checklist of things to discuss and action with your tax partner:

1. Top up your retirement annuity contribution
 
It is important to ascertain whether you have maximised your retirement savings and whether you have minimised the tax payable on your earnings, particularly if you are not contributing to a pension or provident fund and/or have significant earnings other than a salary. It may be appropriate to consider contributing to a retirement annuity fund.
 
Effectively, you are able to contribute 27,5% (this is the maximum) of the greater of your taxable income or remuneration to a retirement annuity investment, subject to a maximum amount of R 350 000 per annum, and reduce your taxable income by the amount contributed. On retirement, a portion may be taken as a lump sum (currently 1/3) of which R 500 000 is tax free (cumulative across all retirement funds you may have), the balance of 2/3 must be used to buy an annuity or invest in a living annuity, the proceeds of which are taxable.
 
Please note taxation rules are subject to change. New generation retirement annuities are far more flexible and cost efficient than those previously offered through life insurance companies. Furthermore, please be aware of the deadline for contributions which differ per financial institution.

2. Invest in a 12J fund
 
If you are wanting to shield your salary, bonus or capital gain from income tax, then investing in a 12J fund is certainly something worth considering. Section 12J is a tax incentive designed to encourage investment into a range of private companies which meet defined criteria. The incentive gives taxpayers the ability to write off 100% of their investment against their taxable income up to a maximum of R2,5 million p.a., thereby giving you an immediate tax benefit of up to 45% of your investment.
 
Read more here on the influence section 12J investments could have on your tax liability:

How Section 12J is Delivering Growth for SA

Section 12J Frequently Asked Questions