Significant changes for Tax Season 2024 in South Africa
SARS announced major changes for the 2024 tax season starting on July 1, including auto-assessments.
SARS highlighted six main changes for individual taxpayers, with updates to processes, forms and tax types.
The changes are mostly technical. They involve adjusting when money is taken out of retirement funds and tax-free savings accounts. They also include adding new subsidies.
In 2024, the solar tax credit is in effect. If you used the subsidy, remember to report it this year.
SARS is now looking at beneficial ownership structures and connecting tax matters to individuals instead of their tax practitioners.
Tax filing dates for Tax Season 2024
Auto-assessments 1 July 2024 - 14 July 2024
Individual Taxpayers (Non-Provisional)15 July 2024 - 21 October 2024
Provisional Taxpayers (Incl Companies and CC's) 15 July 2024 - 20 January 2025
Trusts 16 September 2024 - 20 January 2025
SARS has implemented these 6 major changes:
1) Pro-rata deduction in respect of contributions to Retirement Funds
Section 11F(2)(a) of the Income Tax Act No 58 of 1962 was amended as follows:
Where any person’s year of assessment is less than 12 months, the amount stipulated in section 11F(2)(a) of the Act used to calculate the allowable retirement contribution deduction (currently R350,000) shall be adjusted. The adjusted amount will bear the same ratio to R350 000 as the number of days in that year of assessment bears to 365 days.
If someone's assessment year is less than 12 months, the retirement contribution deduction of R350,000 will be adjusted accordingly on a pro rata basis.
2) Exemption of amounts received or accrued in respect of tax-free investments
Section 12T(4)(a) of the Income Tax Act was amended as follows:
Where any person’s year of assessment is less than 12 months, the contribution limitation stipulated in section 12T(4)(a) of the Act (currently R36,000), shall be adjusted. The new contribution limit will be in effect for any year or years of assessment within a 12-month period. This period starts in March and ends in February of the following calendar year. If someone's assessment year is less than 12 months (not a full year), the contribution limit of R36,000 will be adjusted accordingly on a pro rata basis.
Deductions in respect of the erection or improvement of buildings in Urban Development Zones Section 13 of the Income Tax Act, was amended by substituting the following paragraph in subsection (5) for paragraph (c): ‘‘(c) which is brought into use by the taxpayer after 31 March 2025.’’
Therefore, SARS will amend the Income Tax Return (ITR12) form to extend the allowable deduction until 31 March 2025.
3) Solar Energy Tax credit
To promote clean energy investment, a tax credit for solar power was offered for one tax year.
This tax credit is for new solar panels. The panels must have been purchased and used for the first time between 1 March 2023 and 29 February 2024.
You can deduct 25% of the cost of solar PV panels. The maximum deduction is R15,000. This is done through the solar energy tax credit.
Note that a deceased estate does not qualify for the solar tax credit.
4) Reformulated tax relief for specific machinery, equipment, tools, and items utilized in the generation of renewable energy.
The new tax incentive for renewable energy now includes all eligible sources. There are no limits on electricity generation during this temporary period.
Assets qualify if they are used in the generation of electricity. Businesses can deduct 125% of the cost incurred regarding eligible assets, upfront.
In the event that a taxpayer sells an asset on or prior to March 1, 2026, for which a restructured renewable energy tax benefit is provided, the deducted amounts (up to 125% of the asset's cost) will be completely recovered.
5) ITR12 Form changes
Redesign sections 10(1)(o)(i) and 10(1)(o)(ii): Foreign Employment Income Exemption:
SARS has redesigned the s10(1)(o) (i) and s10(1)(o)(ii) questionnaire to make it easier for taxpayers to complete the return.
It noted that the ITR12 form rules were a challenge to taxpayers.
Before, taxpayers had to select the correct questions for their income, exemptions, and foreign tax credits. They needed to do this before entering the exemption amount to determine eligibility.
The revised form simplifies this procedure, facilitating taxpayers in filling out the return.
Beneficial owner details
Recently, SARS has noticed that Tax Practitioners occasionally enter their own contact details in the section intended for the individual taxpayers they represent while filing ITR12 forms.
SARS reminded practitioners to enter the correct information for individual taxpayers on their ITR12 returns. They should not include the information of the Tax Practitioner. It is important to ensure accuracy when filling out tax forms. Mistakes can lead to delays or penalties.
Crucially, it should be highlighted that a specific container already exists for Tax Practitioners to report their personal details. Hence, Tax Professionals should avoid using fields designed for personal information declaration for their own details.
Furthermore, keep in mind that the details provided in the declaration must be truthful and precise. Lastly, taxpayers should be aware that the South African Revenue Service has implemented many changes, many of which result from improvements in AI. AI is being used to pick up non-compliance with tax obligations and SARS is taken action against these taxpayers.
6) IT3(t) For Trusts
Trusts that have distributions made to their beneficiaries are now required to submit an IT3(t). The IT3(t) reflects all distributions to beneficiaries, and these will be correlated back to the income tax returns of the respective beneficiaries. Read more on IT3(t)
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