How to spring clean your finances

September ushers spring as a new season and is a new month. This time of the year is often likened to cleaning up, clearing up and creating space for new things. This includes arranging our finances accordingly. Often at the beginning of the year, people sign up for things such as gym, subscribe to platforms and attach themselves to new debt. Spring is regarded as a time for one to turn over a new leaf and set their house in order, but what does this practically look like?

Amongst the most basic steps one can take to clean their finances is for one filing for outstanding SARS submissions/VAT returns, review their budget, cancelling unused subscriptions and commitments that no longer serve them.

Filing your tax returns

Filing your tax returns can save you money through refunds as well as avoiding penalties where you may owe the South Africa Revenue Services (SARS) money. This is also beneficial for taxpayers who have paid towards medical aid contributions, a retirement saving product, or a tax-free savings account. These are all ways you can begin to savour money that you have “spent” towards contributions in the year. In addition, you can also claim for your Pay-as-you-earn (PAYE), as you are required to pay up to 10% of your salary through PAYE and you can then claim for up to a maximum of 27.5% of your taxable income, with a cap of R350,000 per annual.

If you run a business, being tax compliant through your tax filings is important. This means that you need to ensure that all your tax-related paperwork is in order. As a business owner, you can also claim for Value-added Tax (VAT). This is what you would have paid on most inputs and expenses you have incurred with added VAT.

Cancel your unused subscriptions

At the beginning of the year, you may have set financial goals and some of them you have reached and others you have not. This could be due to a number of reasons, including oversubscribing to platforms such as Netflix, movie sites, joining the gym but not training, and signing up on music platforms such as Apple Music or Spotify you never use. When one looks at the accumulation of how much their entertainment bill accounts to and other unnecessary expenses tally up to, they would be shocked. If you find yourself spending R50 to R100 or more on each entertainment platform yet, you are not using it, which means it is time to cancel the subscription. If you have signed for gym membership and have not gone to the gym no more than three months regularly, then you need to review. Saving R50 or R100 may sound like it is not much when it is in actual fact, that is cash that you could put to good use or save towards something.

Reviewing budget

There are a lot of expenses that go unnoticed on our budgets, especially when you look at your bank statement. Make reviewing your budget monthly a good habit to adopt. This way, you can plan better for items you spent on promptly as well as items you may not have needed yet overspent on them. This could not only save you money but also help you to budget appropriately for more important things. Align your budget with your priorities and always aim to pay off your debt first, save and invest. This is not the only way to advance your financial goals and financial standing, however, it does improve your financial freedom. Debt is one of the number triggers of stress and once you manage to reduce their debt obligations, builds your savings portfolio, this will free up cash to allow you to invest in different asset classes and help you compound your wealth.

Axcelerate’s Managing Director, Refentse Masha CA (SA) advised that keeping to a healthy and prudent financial status should be a year long process and not only a spring project. “It is important that we always check in with ourselves financially, weekly, monthly, quarterly and of course annually.” This means that we grow in line with our financial goals, added Masha.

Tax season could offer a relief for employees working from home

With the Income Tax season opening for taxpayers to file, some South African individual taxpayers will now be eligible to claim for working from home expenses. According to the South Africa Revenue Services (SARS), employees who have been working remotely can now claim for expenses incurred whilst working from home.

In previous years, the working from home expense claim applied to freelancers and contractors. However, between the period 2020-2021 most employees started working remotely from home and some even set-up office solely for working due to Covid-19 and the imposed lockdowns. It is no brainer that such a tax rebate could potentially come as a relief for most taxpayers during these Covid-19 times.

Who qualifies for claiming for working from home expenditure?

According to Section 11 (a) of the Income Tax Act (ITA) you qualify for working from expense claim “if you are an employee who works from home and has set aside a room to be occupied for the purpose of “trade”, e.g. employment, you may be allowed to deduct certain home office expenses for tax purposes calculated on a pro-rata basis.”. SARS also provides clear guidelines on how to calculate the expenses apportioned to working from home which need to be supported by documents such as invoices, bond statements, a valid lease agreement, and utilities bill.

Who qualifies for claiming for working from home expenditure?

  1. If you have a separate room set up for only office use and only use that room for “trade”.
  2. If as a salaried employee, you perform more than 50% of your duties at home.
  3. If your remuneration is based on commission and you are performing more than 50% of your duties from.
  4. Your employer must allow for working from home

SARS has also provided a list of expenses that fall within the working from home expenditure, and these consists of, rent of the premises, cost of repairs to the premises, expenses in connection with the premises. Other expenses include phones, internet, stationary, rates and taxes, cleaning, office equipment, and wear and tear on either furniture of equipment related to work.

Whilst it may be an opportunity to earn rebates, claiming for home office expenses must be carefully considered, SARS Commissioner, Edward Kieswetter cautioned Taxpayers during a SARS briefing in July. He said that the decision to claim for working from home expenses by using your primary residence could have long-term implications on your capital gains for tax purposes. “The home office area will, on a pro-rated basis, be excluded from the primary residence exclusion of R2 million on disposal of the residence”, states SARS. In other words, that area will be seen as business premise and not as a residential area, which could affect you when deciding to sell your house.

The idea of claiming for expenses incurred from working remotely is good, except one needs to evaluate the impact it has in the long-term. Meanwhile most employees have earned more benefits and savings by working from home resulting in reduced expense on items such as costs on fuel and transportation to and from work.

“It is also wise that taxpayers take precaution when it comes to claiming with SARS, as some claims may offer more short-term benefits than long-term gains. Working from home has benefited both employers and employees but for the benefit of claiming, employees should look at the long-term effects of deeming parts their residential areas as their employment domicile as this may not be easily reversible”, said Refentse Masha Axcelerate’s Managing Director.