Tax for Pensioners

1. Tax for Pensioners Presented by: Penny Smith

2. Who has to complete and submit a return? 1. Remuneration in excess of R250 000 2. Other non-remuneration income 3. Loss from previous year of assessment due to: • Medical expenditure • Retirement annuity/income protection which can be set off against future years earning > R250 000 from a single employer 4. More than one source of remuneration with income < R60 000 (from 2012) Page 2

3. Documentation required to complete your return 1. Tax certificates 2. Bank account details 3. Certificates received for: • Interest (local and foreign) • Foreign dividends 4. Documents relating to medical expenditure: • Income tax certificate from medical scheme • Proof of qualifying medical expenses not recovered from medical scheme • Completed confirmation of Diagnosis of Disability form (ITR-DD) 5. Income tax certificate for Retirement Annuity and Income Protection policies Page 3

4. Documentation required to complete your return- continued 6. Travel allowance or company provided vehicle – logbook required 7. Capital gain transactions both local and foreign 8. Commission income – receipts of expenditure and logbook for travel 9. Letting of assets 10. Financial statement for trading and farming activities 11. Any other income or deductions declared Page 4

5. Employment status If unemployed for the full year of assessment without any income or no capital gain/loss REMEMBER if you: • Incurred any medical expenditure (including contributions) or • Contributed towards a Retirement Annuity Fund THEN - You have to declare such expenditure as it may be carried forward to future years where you may make use of: • the loss created for medical expenses or • deductions for your Retirement Annuity Contributions that do not qualify for a deduction in the current Page 5

6. Medical – Tax credits Page 6

7. Taxpayer aged 65 years and older and Taxpayer under 65 with a disability 2014 2015 Medical tax credit (reduces tax) Medical tax credit amount: Standard medical scheme credits (sect 6A) 33.3% credits fees for medical scheme fees > 3 x standard credits (sect 6B) 33.3% credits for all qualifying medical expenses (excl scheme contributions (sec 6B) Deduction (reduces taxable income) Deduction amount: • Full medical scheme contribution • Other qualifying expenses • Physical disability/impairment expenses (sect 18) Page 7

8. Taxpayer 65 years and older Mr Taxpayer is 65 years old. For the year of assessment commencing on 1 March 2014, he made contributions to a medical scheme of R2 000 p.m. on behalf of himself and his wife. By 28 February 2015 he had incurred R20 000 in qualifying medical expenses. Page 8

9. Taxpayer under 65 with a disability Mr Taxpayer is 34 years old. For the year of assessment commencing on 1 March 2014, he made contributions to a medical scheme of R46 900. on behalf of himself, his wife and their child. By 28 February 2015 he had incurred R9 232 in qualifying medical expenses and also paid R32 691 for two hearing aids for his child who is regarded as disabled. Mr Taxpayer’s taxable income before the medical deduction is R210 200 for the 2013 year of assessment Page 9

10. Taxpayers under 65 years with no disability 2014 2015 Standard medical tax credits – plus 25% of below aggregate total of: The sum of: Standard medical scheme credits (S6A) PLUS 25% of medical scheme contribution > 4 x standard medical credits PLUS Qualifying medical expenses LESS 7.5% of taxable income Deduction amount limited: • Full medical scheme contribution • PLUS Other qualifying expenses • Exceeds 7.5% of taxable income Page 10

11. Taxpayer under 65 with no disability Mr Taxpayer is 34 years old. For the year of assessment commencing on 1 March 2014, he made contributions to a medical scheme of R46 900. on behalf of himself, his wife and their child. By 28 February 2015 he had incurred R9 232 in qualifying medical expenses and also paid R32 691 for two hearing aids for his child who is regarded as disabled. Mr Taxpayer’s taxable income before the medical deduction is R210 200 for the 2013 year of assessment Page 11

12. Physical impairment • Expenses can be claim for the Taxpayer, spouse, child or dependant • A disability that is less restraining than a ‘disability’ (S6A) – the restriction of the person’s ability to function or perform daily activities after maximum correction is less than a ‘moderate to severe limitation’. Maximum correction in this context means appropriate therapy, medication and use of devices. (e.g. bad eyesight, • The amount incurred but not recovered from the medical scheme is allowed to be claimed providing proof of payment of such expenditure is available and kept for 5 years after submission of the return. Page 12

13. Disability • The Act provides for a more widely accepted and understood definition of ‘disability’ instead of the previous term ‘handicapped’. A person who qualified as a ‘handicapped person’ in the past must have his disability re-confirmed in order to continue to claim a deduction. • ‘Disability’ means a person with a moderate to severe limitation of the ability to function or perform daily activities, as a result of a physical, sensory, communication, intellectual or mental impairment if the limitation: • Has lasted or has a prognosis of lasting more than a year; and • Is diagnosed by a duly registered medical practitioner in accordance with the criteria prescribed by the Commissioner. • The disability must be confirmed by a duly registered medical Practioner and a form ITR-DD must be completed (Confirmation of diagnosis of disability form for an individual taxpayer) • If the disability is not confirmed –the qualifying expenses will not be allowed in full and will be subject to the 7.5% limitation • Refer to the “list of qualifying physical impairment or disability expenditure’ document on the SARS website Page 13

14. Physical impairment vs Disability Physical impairment Disability Bad eyesight Hearing problems paralysis of a portion of the body; and brain dysfunctions such as dyslexia, hyperactivity or lack of concentration. Diabetes and asthma are recognized as medical conditions and not as physical impairments. C o Refer to Guide on the determinations of Medical tax credits and allowances on the SARS website Page 14

15. SARS Practice Note: No 37 Taxpayers whose income consists solely of remuneration and/or interest and dividends will be entitled to a tax deduction in respect of fees paid to accountants, bookkeeper, tax consultants and other professional persons or Institutions for the completion of their tax returns subject to the following qualifications • No deduction will be allowed against remuneration, but if the taxpayer’s receives commission it will be allowed • In the case of a pensioner whose financial affairs (pensions, annuities, investment income, etc) are administered by a banking institution, board of executors or similar institution the administration fees, including any fees for the completing of tax returns, paid to the Institution will qualify for deductions • Only fees actually paid will be allowed as a deduction We therefore advice you to have your tax done by an Institution that will let you pay to SARS what is due – NOT more or NOT less and deduct the fees you pay!! Awaiting feedback from SAIT (South African Institute of Tax Practitioners) if we qualify as a “Similar Institution” Page 15

16. Johannesburg Branch: Pretoria Branch: www.payrollsupremacy.com