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Certain over-65s may now have to pay provisional tax

09 March 2015   (0 Comments)
Posted by: Author: Mark Bechard
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Author: Mark Bechard (Business Report)

Amendments to the Income Tax Act that took effect on March 1 will affect certain taxpayers over 65, who will become liable for provisional tax.

The amendments have important implications for over-65s who receive income of more than R30 000 a year from interest, foreign dividends and rental, Johann Bernadé, an associate director in the tax management services department at KPMG, says. They remove the provision that exempted from provisional tax those taxpayers over 65 whose taxable income did not exceed R120 000 in a tax year.

The amendments create uniform exemption criteria for taxpayers of all ages, but link the exemption based on taxable income to the tax thresholds that apply to taxpayers aged up to 65, those aged 65 to 74, and those aged 75 and over.

In terms of the amendments, you are exempt from provisional tax if you do not carry on a business and your taxable income for the tax year:

  • Does not exceed your tax threshold for the tax year; or
  • From interest, foreign dividends and rental was not more than R30 000.

The tax thresholds for the 2015/16 tax year, which began on March 1, are:

  • Taxpayers below 65: R73 650;
  • Taxpayers aged 65 to 74: R114 800; and
  • Taxpayers aged 75 and over: R128 500.

Until now, there were different exemption criteria for taxpayers under 65 and for taxpayers over 65. 

Individuals under 65 who did not earn any income from carrying on a business were exempt from provisional tax if their taxable income for the tax year:

  • Did not exceed the tax threshold for the tax year; or
  • Taxpayers aged 65 to 74: R114 800; and
  • Taxpayers aged 75 and over: R128 500.

Until now, there were different exemption criteria for taxpayers under 65 and for taxpayers over 65.

Individuals under 65 who did not earn any income from carrying on a business were exempt from provisional tax if their taxable income for the tax year:

  • Did not exceed the tax threshold for the tax year; or
  • From interest, foreign dividends and rental was not more than R20 000.

Individuals of 65 or older who did not earn any income from carrying on a business were exempt from provisional tax if their taxable income for the tax year:

  • Did not exceed R120 000; and
  • Was derived only from remuneration (such as a pension), interest, foreign dividends or property rental.

The amendments are in terms of the Tax Administration Laws Amendment Act of 2014, which was promulgated on January 20, 2015.

Bernadé says over-65s who, in terms of the amendments, are now liable for provisional tax will have to make sure their cash flow is sufficient for them to pay income tax early. Non-provisional taxpayers pay tax only after assessment, once their tax returns have been submitted. The first provisional tax payment for 2016 is due on August 31 this year, and the second payment is due in February next year.

Taxpayers who meet the criteria to register as provisional taxpayers but fail to do so and do not pay tax by the due dates become liable for interest and penalties.

Bernadé says accountants and tax practitioners should be proactive in advising clients over 65 who must now pay provisional tax.

This article first appeared on iol.co.za. 


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