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FAQ - 5 July 2017

05 July 2017   (0 Comments)
Posted by: Author: SAIT Technical
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Author: SAIT Technical

1. Will SARS allow a deduction of excess contributions made to both RAF and pension funds be carried forward?

Q: The excess contributions were made before 1 March 2016. I have submitted a 2017 tax return and the contributions brought forward from the 2016 tax year have not been allowed as a retirement fund deduction (code 4029).

A: The principle is that the contributions must be captured on the return of income (the ITR12) in the year of assessment that they were made.  As defined in section 1(1) of the Income Tax Act, an "assessment" has the meaning assigned under section 1 of the Tax Administration Act, and includes a determination by the Commissioner … of any amounts to be taken into account in the determination of tax payable on income in future years.  This requires SARS to reflect the unclaimed amounts on the IT34 and confirms that it must be provided to SARS in order for them to do so. 

The amounts, not allowed in respect of the 2016 year of assessment (or in previous years) must be added to the current contributions, by SARS that is. 

In the example, you provided we can’t test the correct treatment of the amounts next to code 4006, but they appear to be incorrect (the 27,5% were not applied).  The same applies with respect to the amounts to be carried forward – it should not be R1 and it should then reflect to correct amount carried forward. 

SAIT received similar complaints from members and have referred the matter to SARS.   AS there is an assessment, and one that the taxpayer doesn’t agree with, we suggest that an objection is made (or at least a request for reasons).  It may well be an error made by SARS, but until we receive a response from SARS, we don't know how this will be corrected. 

The comment by SARS may also not be correct.  Section 11(k), after its amendment effective 1 March 2016, no longer refers to reinstatement contributions.  In our view, they are therefore seen as current contributions (for tax purposes) and should be added to the 2006 amount when the return is completed.  The fact that the fund treats it differently is not relevant.  The same applies to the old section 11(n), contributions in respect of past periods. 

2. How does SARS determine whether a disability is severe or moderate?

Q: The 2017 IT12 requests to know if a disability is 'moderate' or 'severe'. How does SARS except taxpayers to determine this without subjective judgement as to intention of medical practitioner?

A: The Act refers to a “moderate to severe limitation of a person’s ability to function or perform daily activities as a result of a physical, sensory, communication, intellectual or mental impairment” and therefore doesn’t use the word mild.  The SARS Guide on the Determination of Medical Tax Credits (Issue 7) prescribes what the ‘moderate to severe’ would be for each diagnosis.  It is in Part C of the ITR-DD the registered medical practitioner where must –

  • indicate and describe if the functional limitations with respect to performing activities of daily living are regarded as either “mild” or “moderate to severe”;
  • indicate if the disability has lasted, or is expected to last for a continuous period of more than 12 months; and
  • sign the declaration. 

The Act refers to a “moderate to severe limitation of a person’s ability to function or perform daily activities as a result of a physical, sensory, communication, intellectual or mental impairment” and therefore doesn’t use the word mild.  The SARS Guide on the Determination of Medical Tax Credits (Issue 7) prescribes what the ‘moderate to severe’ would be for each diagnosis.  It is in Part C of the ITR-DD the registered medical practitioner where must –

  • indicate and describe if the functional limitations with respect to performing activities of daily living are regarded as either “mild” or “moderate to severe”;
  •  indicate if the disability has lasted, or is expected to last for a continuous period of more than 12 months; and
  • sign the declaration. 

The Act refers to a “moderate to severe limitation of a person’s ability to function or perform daily activities as a result of a physical, sensory, communication, intellectual or mental impairment” and therefore doesn’t use the word mild.  The SARS Guide on the Determination of Medical Tax Credits (Issue 7) prescribes what the ‘moderate to severe’ would be for each diagnosis.  It is in Part C of the ITR-DD the registered medical practitioner where must –

  • indicate and describe if the functional limitations with respect to performing activities of daily living are regarded as either “mild” or “moderate to severe”;
  •  indicate if the disability has lasted, or is expected to last for a continuous period of more than 12 months; and
  •  sign the declaration. 

We are not sure why the reference to 'mild' is included here.  Ultimately SARS and the taxpayer will have to rely on the medical practitioner. 

We submit that SARS requires an indication whether the limitation is a moderate to severe one.  We submit that SARS requires an indication whether the limitation is a moderate to severe one.  

Disclaimer: Nothing in this query and answer should be construed as constituting tax advice or a tax opinion. An expert should be consulted for advice based on the facts and circumstances of each transaction/case. Even though great care has been taken to ensure the accuracy of the answer, SAIT do not accept any responsibility for consequences of decisions taken based on this query and answer. It remains your own responsibility to consult the relevant primary resources when taking a decision.


 

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