You might not be able to send your tax return electronically just yet, but you can do your calculations online with help from the top tax and auditing firms.
Another tax year has come and gone and soon it will be time to fill in your annual income tax return again. Two years ago, Personal Finance said the days of having to fill in a paper return were numbered and that online forms were on the way - offering instant recall of the figures you submitted previously and help at the click of a mouse.
E-returns are still not a reality for individuals but, Cindy August, a spokesperson for the South African Revenue Service (SARS), says the aim is to have them online by next year. The delay has arisen because SARS is "re-evaluating its electronic filing strategy based on emerging technology and worldwide experiences". SARS has apparently not been able to cater for electronic attachments in a cost-effective and easy manner, nor has it found a way of making the bar code that contains the tax year and taxpayer information available on an online return.
Nevertheless, it is still worth your while logging on to the internet before you fill in your tax return, because tax consultants now offer more help online than they did two years ago.
PricewaterhouseCoopers (PWC), the tax and auditing firm, has re-jigged its personal income tax calculator and this is available on the Moneymax website, a financial portal that also offers online share trading (follow the tax return guide link on http://www.money
max.co.za/tax/default.asp?Nav=tax).
To use the calculator, you need to register with Moneymax, but this is free. You also need to fill in details such as your identity number and your tax number and will need your IRP5 from your employer. From there on, the site will guide you on how to fill in all the relevant information. The site stores your details, and you can print out the information you input to use when filling in your return.
While you are using the online calculator, you can request explanations of things such as deductions and allowances, and, in the process, find out whether you are claiming all you can against your taxable income.
The calculator will work out what you owe, or are owed, by SARS. Because your details are saved, you can return later and "tinker" with the numbers.
The calculator does not offer any help with capital gains tax (CGT), but this does not mean there isn't online help available. If you have a capital gain to declare, you will want to know which is the most tax-favourable method of calculating it.
In terms of the law, you can use one of three methods to determine the base cost of the asset on October 1, 2001, when CGT was introduced:
- You can use the market value of the asset as at October 1, 2001;
- You can use the time apportionment method; or
- You can declare 20 percent of the proceeds of the sale as your base cost.
The method you choose can make a significant difference to the value of your capital gain and hence the tax you pay.
There are at least two online calculators that can help you with these CGT calculations.
PWC has a fairly comprehensive free CGT calculator called e-Capman (follow the e-Capman link from www.pwcglobal.com/za). This calculator can work out your capital gain, but not the tax you will pay - as this depends on your marginal tax rate whether or not you have capital losses from previous years, and the exemption on the first R10 000 of gains or losses you, as an individual, make each year.
The calculator includes a list of the valuations SARS has published for shares listed on the JSE Securities Exchange as at October 1, 2001, but not for unit trusts.
E-Capman's calculations factor in, among other things, the affect of:
- The asset being your primary residence;
- The asset being used partly for business and partly for private purposes - for example, a building you use for your own business and for rental income;
- Disposal of the asset as a donation to someone, in a transaction with a person connected to you, or in return for something not measurable in money terms;
- Expenses incurred since you acquired the asset, for example, if you made improvements to a building;
- Use of the proceeds to reduce a debt; or
- Expenses incurred in disposing of the asset, for example, getting it valued.
E-Capman does not store any information. If you want to keep a record of what you have calculated, you should print it out. E-Capman also has a multiple-entry calculator which can be useful when you need to work out the most tax-favourable gain resulting from the disposal of what are known as "identical assets" - for example, units in a unit trust fund.
In terms of the law, you can use any of the following methods:
- You can use what is known as the weighted average price of those assets as the base cost; or
- The first-in-first-out rule - you sell the identical assets in the order you bought them and apply the appropriate base cost; or
- You can identify which assets you are selling and make use of the appropriate base cost.
You need to be careful which method you choose, because you will have to use the same method if you dispose of the rest of the identical assets at a later stage.
Unfortunately, E-Capman cannot yet help you with calculations under the first-in-first-out rule. To perform such a calculation you may be tempted to pay to use Deloitte & Touche Tax Technologies' calculator Capcalc ( www.dttt.co.za), which is capable of working out the most favourable method of calculating your gain in terms of all the methods, both for identical assets and non-identical assets.
Capcalc has a list of the SARS-approved valuations of local unit trusts, as well as JSE-listed shares, and it costs R114 for each calculation. However, the cost could still be cheaper than asking a tax consultant to do the calculations for you.
Capcalc also does not store any information you enter. You must print out the results of the calculation or email these to yourself.
You will probably find e-Capman and Capcalc very useful if you are wondering whether or not to have an asset valued for CGT purposes. The September 30, 2003 deadline for valuations of assets for CGT purposes is looming. If you have an idea of the market value of the asset, use one of the calculators to see if this is, in fact, the most favourable method. Once you know this, you will be able to decide whether or not to pay to have your asset valued by professionals.
If you do decide to have a valuation, visit the South African Institute of Valuers website ( www.saiv.org.za) for general information and the organisation's recommended tariffs. For a list of valuation firms visit www.valuer.co.za, which also has a CGT section.
This article was first published in Personal Finance magazine, 2nd Quarter 2003. See what's in our latest issue