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How Will the New Tax Year Affect Your Finances? 2023 tax year and what to expect

Updated: Feb 26


The new tax year has started and includes the period from the 1st of March 2022 until the 28th of February 2023. 2023 tax year and what to expect

In this week’s newsletter, we take a look at what changes to expect for the new year and even help you set you up some New Year’s tax resolutions.

2022 money stacked

2022 TAX YEAR VS. 2023 TAX YEAR: THE CHANGES

There are slight changes ahead for the tax rates for individual taxpayers. Let’s compare the rates for last year (2022) to this year (2023).


Below are the rates of tax for individuals for the last year i.e., 2022 :

2022 south african individual tax tables

Below are the rates of tax for individuals for the new year, i.e. 2023 :

2023 individual tax tables

Below are the tax rebates and thresholds for 2022 and 2023 :

2022 south african tax thresholds
2022, 2023 individual tax rebates

WHAT TO EXPECT THIS TAX YEAR

AVOID TAX DEBT WITH RETIREMENT ANNUITY CHANGES

Have you ever found yourself in hot water not being able to pay a huge tax bill and SARS penalties at the end of the year? SARS is making things easier by changing how they do tax calculations on your retirement fund from the 1st of March 2022.

You may receive several annuities or pensions from your previous employer or pension fund. Previously, your fund used to look at each income source separately when calculating your tax for the year.


The different amounts you received most likely fell below the tax threshold, and therefore you paid no PAYE on your pension or annuities during the year. However, a problem comes in when these different income sources are added together at the end of the tax year to determine what you owe the Tax Man. It often happens that in total, you've earned more than the tax-free threshold, and you owe money to SARS.

With recent changes being applied to the new tax year, SARS can now use data that considers all your income sources to determine a more accurate monthly tax deduction. If your retirement fund administrator deducts an accurate amount of PAYE from your pension or annuity every month, you shouldn't be faced with that dreaded tax debt at the end of the tax year.


So, how will this work, and what do you need to do?

According to Tax Tim, you won't have to do anything, as SARS will provide your retirement fund administrator with the PAYE deduction percentage. This rate will then apply for the whole tax year unless the circumstances influencing your tax liability change. Your fund administrator could revert to applying the normal PAYE deduction rate from the month in which they become aware of the change in circumstances.

This means that your monthly tax deduction may be higher, but you will avoid a nasty tax bill at the end of the tax year.


Your fund administrator can continue deducting PAYE at a higher rate than the SARS rate if you ask them to do this. They can also continue using the normal tax deduction rate, but you could get an unpleasant surprise at the end of the tax year.

If you want to put your mind at ease, you can talk to a consultant at Wallstreet Financial Services to learn more about your retirement fund and/or to get tax help and advice.

WEALTH TAX

Financial experts have warned that SARS has a renewed focus on wealthy individuals in South Africa and is priming taxpayers to introduce a wealth tax.

A post-budget review by the National Treasury in February 2022 revealed plans by SARS to target wealthy taxpayers in the coming year as part of its broader disclosure of a wealth program.


"SARS intends to go after 'unexplained wealth,' and has proposed that all provisional taxpayers with assets above R50 million be required to declare specific assets and liabilities at market values in their 20203 returns." Source: BusinessTech


The experts speculate that the main factor driving the closer look at millionaire wealth is the government's need for additional tax revenue to finance its social projects and grants – such as the R350 social relief grant, which is likely to become a fixed basic income grant in the future. There is also a planned National Health Insurance (NHI) scheme – meaning the government will have to consider who and what it taxes carefully.


If you are fortunate enough to fall in the bracket of being applicable for wealth tax, then ensure you declare your assets based on their costs and liabilities in your tax return for the new year. "For honest taxpayers, this new division will help simplify their taxes and make things easier, but where we suspect dishonesty, SARS will come down hard and be vigilant for any potential corruption or attempts to hide assets," says SARS commissioner Edward Kieswetter.


wealth stacked money

FOREIGN INCOME TAX

Do you earn a global income while working on South African soil? Just because it's not the country's currency doesn't mean it isn't taxable. Whether you're earning Dollars, Euros, Pounds, or Yen, as a South African, it's more than likely you'll have to pay tax on this income. This is because South Africa's taxation system works on a residence-based tax system, meaning we're taxed on worldwide income.


There are some conditions, however, where income earned for services rendered outside of South Africa will be exempt from income tax., and include the following circumstances:

  • You have a formal employment contract with a resident or non-resident employer.

  • You are a South African tax resident.

  • You spend at least 183 days of a consecutive 12-month period outside of SA rendering services to your foreign employer, and at least 60 of these days are continuous or unbroken.

tax and calculator and blocks

NEW TAX YEAR RESOLUTIONS

Have you ever thought about New Year's Tax Resolutions? Probably not because it is challenging enough to keep personal New Years' resolutions after January.

Ask yourself:


What can I do better regarding my personal and business taxes?

What strategies can I employ to ensure optimal tax planning and savings?

Good tax planning for the year ahead starts with organization and awareness. Each person's tax situation varies depending on an infinite number of possibilities; however, there are few tasks you can establish regardless of your situation:

  1. Keep and file all your receipts, petrol slips, and invoices. If you are claiming fuel expenses from SARS, you need to keep a logbook for the entire tax period.

  2. Keep your IRP5, medical tax certificates, and any other important documents in a safe place.

  3. Consider tax situations when making life changes and signing agreements, for instance, signing to join a retirement annuity or getting married in a community of property.

  4. Deal with tax notices promptly.

  5. Look out for an automatic SARS assessment notice.

  6. Double-check personal information with your employer.

  7. Plan ahead if you might owe taxes.

  8. Plan ahead for potential tax refunds


The best way to structure your income and expenses to minimize the amount of tax you have to pay legally is to get a tax specialist to help you. Contact Wallstreet Financial Services if you need assistance with your taxes. You can also speak to one of our professional financial advisors if you want to discuss products that can help you reduce your taxable income and ways to maximize your allowable deductions.

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