Tips to help you get on top of your tax return this year

Election Fever Seizes the Globe | Allan Gray

For us in SA, our elections and subsequent coalitions, it’s been a busy month, yet many other elections and negotiations are happening worldwide this year.

It may have felt to many of us that it took a long time, yet our GNU was negotiated relatively quickly over a few weeks;

 Allan Gray shares their latest thoughts on as elections are unfolding;

“According to Deutsche Bank, 2024 will see the most people vote in a single year in recorded history. As speculation fuels heightened uncertainty worldwide, Thalia Petousis discusses the impact of elections on financial markets.

The year of the great election has commenced, and a swing to the right is sweeping through the polls and flooding into ballot boxes.

This is evident in the US, with solid polling figures for Donald Trump and the Republican Party; in the United Kingdom, where Nigel Farage’s far-right Reform UK party has eroded some of the support base of the more temperate conservatives; in Germany, where the Social Democrats and Green Party have lost voter share while the prospects for the far-right Alternative for Germany (AfD) party have lifted with the conservative tide; and in France, where Marine Le Pen’s right-wing Rassemblement National party significantly increased their seats in parliament.

These elections have arrived just two years after the highest levels of developed market inflation in 40 years. History doesn’t repeat itself, but it often rhymes.

In the Winter of Discontent following the high inflation of the 1970s, Margaret Thatcher led the Conservative Party to reach three landslide victories in the decade after that. The current “winter of disconnect” is not only fuelled by a reduction in purchasing power and social inequality but is also deeply rooted in the anti-illegal immigration movement.

Election predictions and results continue to influence markets.

Election results and polls are having divergent impacts on financial markets. French bond spreads have reached their weakest levels versus German bonds since 2012, presumably reflecting unease about the future path of government spending.

However, the S&P 500 has recorded new highs in the US, boosted by a buoyant consumer. US households’ equity exposure has risen to the highest levels since 1968, and the prospect of a Republican Party win could bode well for a lower or more muted path for capital gains tax.

In South Africa, the election results reconfirmed the polls that came before them – a significant loss of voter share from the African National Congress (ANC) to Jacob Zuma’s uMkhonto weSizwe Party (MK Party) in KwaZulu-Natal. The market roiled as coalition outcomes were debated in the days that followed. Still, the MK Party’s disorganisation, infighting, constantly changing member list and radical manifesto have made it too unruly to enter coalition discussions.

Similarly, there were already mutterings pre-election from within the ANC that earlier provincial coalition partnerships with the Economic Freedom Fighters (EFF) had been damaging to the party. Thus, the formation of a government of national unity (GNU) took place – sans the EFF and MK Party.

In South Africa, local bonds and equities have posted an 11% and 12% annualised year-to-date return, respectively. The SA 20-year bond yield has declined from a year-to-date high of 13.2% to as low as 11.9%, reducing the cost of government funding. This reflects market exuberance with the results of the SA elections and the formation of a GNU, which includes the Democratic Alliance.

A more confident SA market and a stronger rand can also bleed into lower imported cost inflation and, therefore, have the potential to ease inflationary pressures from fuel and certain food items. As such, the SA market now prices for two to three interest rate cuts over the next two years.

In 2017, market exuberance following Cyril Ramaphosa’s election as president of the ANC saw a similar move in bonds. Ramaphoria, as the period came to be known, saw the 20-year bond spread versus US Treasuries decline from 725 basis points (bps) to 560bps or roughly a 13% capital return over just three months.

Currently, the 20-year spread is at 753bps versus US Treasuries, reflecting that SA bonds are, in fact, cheaper now than they were pre-Ramaphoria on a relative valuation basis, given our larger debt load and more severe interest service burden. Does this mean that this rally will have longer to run if foreigners return sustainably to SA bond markets?

Casting one’s eye one year forward from Ramaphoria to December 2018, yields were again wider. The capital gain versus pre-Ramaphoria collapsed to just 3%, and the rand was weaker alongside it.

A lesson to be learned from this experience is that given the interwoven nature of the global economy and consumed goods, the path of interest rates can struggle to sustainably decline if global inflation misbehaves. In 2018, US inflation deviated from the Federal Reserve’s 2% target and rose to close to 3%. The inflation figure is similar today.

See the latest US inflation data from yesterday, further below

In May 2024, US inflation printed at 3.3% and the seven exuberant interest rate cuts priced into markets back in January 2024 have yet to materialise. The US labour market continues to be robust and consumers have been spending record amounts on items like travel.

South Africa needs meaningful change.

A more imperative takeaway from the Ramaphoria period is that political goodwill alone cannot change our country's path. For this time to be different, we need highly capable leaders to execute their mandates effectively after many years of decline in key government departments.

Only the right mix of ingenuity and skill can improve South Africa’s growth prospects and ultimately reduce unemployment. Some political parties have, for example, proposed ideas for revamping Home Affairs and resolving the ongoing tourist visa issues that frustrate this sector of the economy.

Strong leaders in the right roles in critical departments could have a tangible impact, as we saw when Edward Kieswetter turned the South African Revenue Service (SARS) around after state capture had eroded its operational ability and institutional integrity. Only time will tell if we can see a similar rebuild on a grander scale as the GNU and newly minted ministers find their feet.

Source: Allan Gray | Election fever seizes the globe

Tips to help you get on top of your tax return this year

Carrie Norden 

- 11 July 2024

The South African Revenue Service (SARS) is focused on improving its systems and processes to ensure taxpayers comply with their legal obligations and file their tax returns correctly and on time. Carrie Norden, senior tax specialist, offers a step-by-step guide to help us tackle this year’s filing season.

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The notable dates for the 2024 tax-filing season are:

• Auto-assessment notices sent by SARS: 1 to 14 July 2024

• Filing dates for individual taxpayers (non-provisional), including those who have been selected for auto-assessment: 15 July 2024 to 21 October 2024

• Filing dates for provisional taxpayers: 15 July 2024 to 20 January 2025

• Filing dates for trusts: 16 September 2024 to 20 January 2025

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Before filing season starts, it is advisable to check that your information is up to date with SARS on eFiling or the SARS MobiApp. This includes static details (your name, address, cell number, email address); your preferred communication channel (SMS or email); your income tax number; bank details; marital status and your country of tax residency. This is important to ensure that SARS can reach you (via your preferred communication channel) if you are selected for auto-assessment or pay into the correct bank account if you are due a refund.

If you have forgotten your South African income tax number, you can reach out to SARS via eFiling, the SARS MobiApp, SMS or the SARS Online Query System to confirm it.

Your marital status impacts how investment income information is prepopulated. If you are married in community of property, you are taxed on half of your own interest, dividends, rental income and capital gains, and half of your spouse’s, so their information will also appear on your return (and you need to add any missing information).

Your tax residency status impacts your tax liability. If you have ceased to be a South African tax resident during the tax year, you should inform SARS by completing the Registration, Amendments and Verification form (RAV01) on eFiling (or at a SARS branch by making an appointment) with the date on which you ceased to be a tax resident and attaching the relevant supporting documents. If you previously informed SARS that you have ceased to be a tax resident and would like to request confirmation of your status, you can submit your request to [email protected]. There may be tax implications when changing your country of tax residency. For more details, please refer to Carla Rossouw’s article “Understanding your tax obligations on leaving South Africa”, available via our website.

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Before you get started, make sure you have all your relevant supporting documents, or request these from your service providers. Examples are listed in Table 1. Some of the information from these documents will be prepopulated on your tax return and you will need to cross-check it. You may need to add some of the information manually.

You are required to keep all supporting documents for five years from the date of submission of your tax return, as SARS may request these documents to verify the information declared.

^{_{4. Process to follow to file}}

If you are unsure if you are required to submit a return, use the intuitive tool on SARS’s website to determine whether you meet the requirements to file. The requirements for individuals to file are also summarised in the checklist at the end of this article.

If you were auto-assessed and are happy with the assessment result

For certain pre-selected taxpayers (whose tax affairs are not too complicated), SARS uses third-party data from employers, financial institutions, medical schemes, retirement fund administrators, registered insurers and other providers to perform a tax calculation and issue a Notice of Assessment (ITA34) for the tax year.

If SARS notifies you via SMS or email that you have been selected for auto-assessment and an ITA34 for the 2024 tax year has been issued to you, you need to log into eFiling or the SARS MobiApp to view the assessment. The ITA34 document will display the data SARS used to calculate your assessment.

This year, SARS is increasing the number of taxpayers who are auto-assessed. If you are unsure whether you have been selected for auto-assessment, you can check via the SARS Online Query System.

If you agree with the auto-assessment result, you do not need to do anything. If a refund is due to you, it should be paid within 72 hours, provided the banking details SARS has on record for you are correct. If you owe SARS money, you need to make payment via eFiling or the SARS MobiApp before the payment due date (displayed on the ITA34) to avoid interest or penalties being charged. You can also pay SARS at your bank branch or via EFT.

If you wish to amend or add any information to your auto-assessment, you will need to log into eFiling or the SARS MobiApp and file a tax return in the usual way. You have from the date you receive the auto-assessment notice from SARS until the end of the 2024 filing season to do so.

If you need to submit a return

Having completed steps 2 and 3 above, you can log into eFiling or the SARS MobiApp and get started on your return. The process is outlined below:

a) Build your return: Once you have opened your return, your filing process begins with a “form wizard” – questions which you will need to answer on the first page to customise the additional fields which display. You can consult the SARS Comprehensive Guide to the ITR12 Income Tax Return for Individuals, available on their website, for assistance. Some of the information will be populated automatically once your return is generated; you will need to manually add other information.

b) Check against your supporting documents: Once your return is built, compare the prepopulated third-party information against the information on your supporting documents. Third-party data that has been prepopulated in your return cannot be edited. If any of the prepopulated data is incorrect, you will need to ask the third party that provided the data to correct it by resubmitting the amended data to SARS.

c) Add outstanding information: You will need to manually add information from your supporting documents that is not automatically included. Examples include capital gains or losses incurred from the sale of assets (which can be found on your IT3(c) tax certificates), rental income and related expenses, and excess medical expenses which were not covered by your medical aid.

d) Calculate your outcome: Use the tax calculator button to get an estimate of your assessment result based on the information you have included. If it feels off, check carefully that all the information you have inputted is correct.

e) Submit your return: Once you are comfortable with the result, you can go ahead and submit it.

f) Check your outcome: An ITA34 document will be generated with your results for the tax year, which you should save for your records. You can also check your tax return status on the SARS Tax Return Status Dashboard (part of the SARS Online Query System), which allows you to check the progress of your income tax return.

Late submissions

SARS charges non-compliance penalties for each month that your return is outstanding. These penalties are charged where one or more tax return(s) are outstanding from the 2007 tax year onwards. SARS may collect these penalties from appointed third parties, such as your employer, or investment manager or directly from your bank account if you do not submit your returns or pay your tax liability on time.

Under certain conditions, you can request an extension to file your tax return within 21 business days after 21 October 2024. However, the extension does not waive late-filing penalties, which means that any return filed after 21 October 2024, regardless of the circumstances, will be penalised.

If you need further assistance, a full list of help channels is available on the SARS website, or you should chat with your independent financial adviser or tax practitioner. 

US Inflation Falls More Than Expected

In the latest news, US inflation data fell more than expected late yesterday to 3,0% per annum.

The overall inflation environment in the US over the past few years is shown below;

In the bigger picture, the direction has undoubtedly been firmly downwards over the last year.

US inflation is falling faster than forecast now to 3,0 per cent in June, leading markets to increase the likelihood of interest rate cuts and pushing down the dollar.

In an encouraging sign for the US Federal Reserve, as it debates how quickly to cut rates from their 23-year high, the year-on-year rise in consumer prices came in well below May’s rate of 3,3%, and was also less than economists’ expectations, compiled by Bloomberg, of 3.1 per cent.

The dollar fell 0,8 per cent against a basket of currencies after the Bureau of Labor Statistics figures were published, and the Rand went under R18,00 to the USD level again.

US Bond markets have now increased their expectations for two interest rate cuts this year.

According to LSEG data, the odds of a September cut rose to 96 per cent in the immediate aftermath of the CPI data, compared with 72 per cent beforehand. The inflation figures come as the Fed looks for further evidence that price pressures are easing in the world’s largest economy. Fed Chair Jay Powell said this week the central bank needed “more good data” before it could confidently lower interest rates.

The latest data reinforces Powell’s message to US lawmakers earlier in the week that the US economy is no longer “overheated”, with the labour market showing more signs of cooling. Powell stressed that officials would seek to avoid squeezing the economy too much by keeping interest rates too high for too long.

For us in SA, this creates the expectation for a stronger Rand, which bodes well for lower fuel prices, as we have seen the last two months, and that can be expected to continue. As a net importer of offshore inflation, lower SA inflation, which results in lower interest rates for SA, is very market-friendly.

Friday Food For Thought