How to get a tax refund

Getting a tax refund is one of the most exciting topics spoken about during tax seasons. Over our years of experience, we have noticed that every individual thinks that by just submitting their tax returns, they are entitled to a tax refund which is so not true. For this purpose, we would discuss tax refunds only from the perspective of a salaried individual and highlight only the things that can either give you a tax refund or reduce your tax liability. The following can get you a tax refund or reduce your tax liability:

1. Travel Allowance:

If an employer grants an employee a fixed travel allowance, the employer would normally include 80% of the fixed travel allowance as the employee taxable income for purposes of employee tax. By including causing you to be taxed on 80% of the travel allowance, the employer is effectively saying that it believes that 80% of the employee travel with the vehicle would be for private purposes. Consider the diagram below

However, if the employer is satisfied that at least 80% of the use of a vehicle would be for business purposes, then only 20% of the fixed travel allowance would be included as part of taxable income. What the employer is saying here is that 80% of the vehicle would be used for business purposes. Consider the diagram below

To get a tax refund from travel allowances, it is important that you keep a logbook of business and private kilometers traveled. Now let’s assume that you traveled for a total kilometer of 30000km and of the 30000km, 9000km was for business purposes. That means that 30% of the vehicle was used for business purposes. Let us further assumed that the employer happened to have included 80% of the travel allowance in your taxable income. This means that you would get a tax refund as only 70% should have been effectively included.

2. Retirement annuity contributions:

your Retirement annuity contributions are tax-deductible. For example, if you earn R400,000 per year and contribute R160,000 towards your retirement per year, you would only be taxed on R240,000 (R400,000-R160,000) saving you some tax money. Isn’t this awesome? However, keep in mind that there is a limit to the amount that can be deducted. The limit is 27.5% of your remuneration or taxable income limited to R350,000 per year. Therefore, it pays to contribute towards your retirement.

3. Donations:

If you donate to an approved Public benefit organization such as a charity, you can get a tax refund provided that the charity issues you with a S18A certificate.

4. Medical aid contributions:

If you contribute to a medical aid, you are entitled to a medical scheme fee tax credit which effectively reduces your tax liability or entitles you to a refund.

Medical Tax Credit Rates for the 2019 to 2020 tax years

This means if you contribute to a registered medical aid and have say 2 dependants. You would be entitled to a tax credit of (310+310+209) x 12 months = 9948. This amount changes every year and it is thus your responsibility to familiarize yourself with the current amount.

5. Additional medical expense tax credit

You get this credit for all qualifying medical expenses that were made but were not covered by your medical scheme

PLEASE NOTE: As to whether you would receive a tax refund or not would also largely depend on whether or not you disclosed all your contributions such as medical aid contributions, retirement annuity contributions, e.t.c  to your employer and whether your employer took the necessary information into account when calculating and paying over your tax to SARS.

Need help with submitting your tax returns? no worries we have got you covered. Click here to hire a Registered Tax Practitioner