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Personal investing

Tax season: Your top tax investment questions answered

Confused about how to report on your investments to SARS? With the 2017 tax season in full swing, now is the time to get your documents ready.

1. What documents do I need?

When filling out your tax return, gather all the supporting documents concerning your investments and employment income. This may include an IRP5 or IT3(a), which report all employment and annuity income as well as lump sum payments. An IRP5 is issued when tax was deducted and an IT3(a) when tax was not deducted. 

Other certificates you may get are an IT3(b), which reports interest and dividends for local and offshore investments, and an IT3(c), which lists capital gains and losses for local and offshore investments. Those who have tax-free investments (TFIs) may also receive an IT3(s), which gives details of all contributions, withdrawals and returns earned on TFIs. Retirement annuity fund members will receive a retirement annuity fund contributions certificate if they made contributions during the tax year. 

In most cases, your investment firm will send you these certificates before the tax season begins. 

2. What information do I need to report regarding my tax-free investments?

You are required to declare the contributions and withdrawals made, as well as the return on all of your TFIs.

However, if the investment is structured as a policy issued by a life insurance company, as is the case with the Allan Gray TFI, you are not required to declare income earned and capital gains or losses in your income tax return. This is because the life insurance company owns all underlying investments of your account and, as a result, all income earned on the underlying investments (interest, dividends and capital gain/losses) accrue to the insurance company for tax purposes and not directly to you, the policyholder

3. Is it necessary to submit tax returns for minor children?

The answer is, it depends.

If a minor does not have any deductions to claim and the child’s gross income consists solely of amounts received from a TFI, there is no requirement to submit a tax return to SARS.

While the Income Tax Act requires a parent to include in their tax return any investment income received by any of their minor children, either directly or indirectly from an investment made by their parent, TFI products are exempt. As receipts or accruals from TFIs are exempt from normal tax, they are not income and there is no obligation to include them in the return of the parent.

For the same reason, it is not necessary to register your child as a taxpayer. Your child only needs to be registered if they become liable for any normal tax – for example, from modelling work.

However, if you invest in a unit trust on your child’s behalf, you will have to declare their investment income in your own tax return.

4. How do I file my investment income?

Investment income is filed together with your employment income in your income tax return. Use the eFiling service - it is convenient, secure and easy to use. Alternatively you can also use the SARS Smartphone app or ask for assistance at your local SARS branch. If you use eFiling you have until 24 November to submit your return. 

SARS has tried to make life easy for tax payers by simplifying the paperwork and process of paying tax. Tax affairs can still be complicated and if you need guidance, it may be worthwhile talking to your independent financial adviser or hiring a tax consultant to help you.

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