cash basis taxation

[duncan drennan]

How does one go about applying to be taxed on a cash basis? This is for normal income tax.

My wife is an occupational therapist and the nature of her work is that payments can come a number of months later (sometimes even years). AFAIK in SA the general principal is that we work on an invoice basis for taxation, but it is possible to apply to be taxed on a cash basis.

How does one go about applying for that?

(I haven't checked out SARS website yet, will do shortly and report back if no one has the answer)

[Dave A]

Please check before you take my word for it but, as far as I know this can only be done with VAT. If it can be done on a cash basis I'm off to kill my accountant.

[duncan drennan]

Please check before you take my word for it but, as far as I know this can only be done with VAT. If it can be done on a cash basis I'm off to kill my accountant.

I'm definitely going to check! I'm not sure what the criteria are though. I've heard of this being done, and when Donné spoke to the owner of a large practice in Pretoria that she used to do work for, she indicated that this can be done and that they are operating in that way...will find out more.

[Sieg]

Income tax and "cash" basis

DSD:

There is no distinction made in the Income Tax Act for "cash" basis. Tax is payable on one's taxable income. Income includes "receipts and accruals" so if an amount "accrues" to a taxpayer, even if not yet paid to the taxpayer, the amount is included in "taxable income". Sounds unfair, but in the words of Henry Kissinger (anyone remember him?) - "Dats da way dey did it when dey did it" or similar.

Regards
Sieg

[duncan drennan]

My wife spoke to the accountant at the practice she worked at in Pretoria and she said there was law allowing for natural people to only declare income on amounts actually received or expended.

So I went to http://www.acts.co.za/tax/index.htm and managed to find Section 37(g), which has this in it,

provide for the variation of any provision of this Act relating to the determination of the taxable income derived from a small business undertaking, including--

i) the determination of taxable income having regard only to amounts actually received or expended;

which would imply this may be done in a "small business undertaking". Now I just need to figure out what the exact rules are around this, but it would seem that for my wife's case this may be a possibility.

Will update you when I've got some more info.

[duncan drennan]

I sent a query to SARS via email and got a simple and clear answer,

“Section 37G merely introduces enabling legislation, allowing the Minister of Finance to issue regulations to facilitate tax compliance requirements in respect of small business undertakings.

No regulations have been issued and a small business undertaking is therefore not allowed to submit returns on a cash basis.”

The message: don't try this at home folks