[Article] Proposed changes to 2nd Provisional tax payment

[Morticia]

Reckon there's a few forum member who will be affected by these proposed changes.

The Revenue Laws Second Amendment Bill was introduced to Parliament in October 2008. It contains proposed changes to the rules governing the calculation of the second provisonal tax payment that will have a significant impact on provisional taxpayers.

To cut a long story short, you may no longer take the easy way out and base your 2nd provisional payment calculation on the "basic amount" as provided by SARS (which usually happens to be your prior year assessed income which is also invariably lower than your current year actual earnings)

The calculation must now be performed on not less than 80% of your actual taxable income for that specific year, failing which an additional tax (penalty) of 20% may be levied.

The prososed effective date is 1/1/2009 which doesn't leave much time for rescue plans.

Points of particular concern are the various forms of accounting adjustments in the case of companies and profit-related awards to individuals - this type of detail is usually only available after year end and when financials are completed.

Depressing thought for the weekend and up-coming festive season, but what the heck - taxes have never been a source of fun..........

[Dave A]

The calculation must now be performed on not less than 80% of your actual taxable income for that specific year, failing which an additional tax (penalty) of 20% may be levied.

That penalty of 20% is hectic!

At least the 20% margin for error is an improvement. Didn't you have to get within 10% before to avoid penalties?

[Morticia]

Yes, but that only applied if you did not base your calculation on the SARS "basic amount". So a "cop-out" was to accept their estimate irrespective of how inaccurate it might have been in comparison to your actual income once calculated.

Now you have to be 80% accurate, i.e you no longer have that additional 7 months to 30/9 to the 3rd top-up payment to fix any mistakes/short-payments

[Morticia]

Small concession by SARS on this issue

[Dave A]

OK. So the gist of that is both methods will be accepted for the second provisional return for tax year 2009.

I like the 80% minimum goal. I just don't like that penalty. I'm sorry, 20% is a bit steep!
I see there is some latitude to appeal. I'm going to keep my working papers as to how I arrived at my estimate in future, just in case.

You never know...