Reducing Personal Income Tax

[HavocXphere]

What LEGAL ways are there to reduce your personal income tax?

For salary earners little to none. An RA seems your best bet at the moment...especially with the incoming changes. They are boosting the percentage you can save & thus deduct dramatically. Tax law is really not written to allow a lot of deductions for salary guys...thats why there is PAYE...you earn it > they tax it.

That being said I've heard some whispers that all is not well on the RA/pension/provident front. I guess it depends on whether you are inclined to grab a tin foil hat or not.

my salary

The tax on Capital Income is very low.

Wrong thread JStrike. I hope...

 

[JStrike]

Ditto to this.
"Capital Income" nonsense.

Are you saying that Capital Income doesn't exist, or that it's tax rate is not lower than for Revenue Income?

 

[JStrike]

For salary earners little to none. An RA seems your best bet at the moment...especially with the incoming changes. They are boosting the percentage you can save & thus deduct dramatically. Tax law is really not written to allow a lot of deductions for salary guys...thats why there is PAYE...you earn it > they tax it.

That being said I've heard some whispers that all is not well on the RA/pension/provident front. I guess it depends on whether you are inclined to grab a tin foil hat or not.



Wrong thread JStrike. I hope...

No The point I was making was that with Revenue based taxes (Such as Income Tax), there is not much you can can do to lower your tax liability. What he needs to move towards is increasing the proportion of is income that is derived from Capital. It is taxed at a far lower rate

 

[goga]

No The point I was making was that with Revenue based taxes (Such as Income Tax), there is not much you can can do to lower your tax liability. What he needs to move towards is increasing the proportion of is income that is derived from Capital. It is taxed at a far lower rate

Please define Capital Income, how it works (in your mind), and how its taxed / rate.

There is no "capital income" in my mind. There is capital profit (from selling an asset, be it flat, house, equipment), which is taxed at a lower rate provided you don't generally "trade in flats/equipment sales" etc.

But investing your capital and earning an income from that capital - taxed at same rate as normal salaries or rent income or whatever.

 

[JStrike]

Please define Capital Income, how it works (in your mind), and how its taxed / rate.

There is no "capital income" in my mind. There is capital profit (from selling an asset, be it flat, house, equipment), which is taxed at a lower rate provided you don't generally "trade in flats/equipment sales" etc.

But investing your capital and earning an income from that capital - taxed at same rate as normal salaries or rent income or whatever.

In SA, the two big forms of Capital Income taxes are Dividends Tax and Capital Gains Tax

 

[goga]

In SA, the two big forms of Capital Income taxes are Dividends Tax and Capital Gains Tax

Dividends:
Taxed before it gets to your hands, at 10% odd, and the company's profits were already taxed at 28% odd..so thats 38%
Not a bad option to invest invest invest so you have substantial dividend income ("tax free" once in your hands) but realistically which salaried employee is able to invest enough to substitute / balance salary income with enough dividend income. Talking huge investments here to generate substantial income to live on.

Capital Gains Tax:
This is essentially sale of items that are "capital in nature" as you've pointed out, and if you're selling capital assets day-to-day (ie: you buy and sell flats, buy and sell farm tractors etc), its no longer capital in nature - as you're essentially trading in these assets and they're then normal inventory. The income will then be treated as revenue in nature anyways, so pointless.

All very pointless.

If you're salaried, limited options i.t.o structuring travel allowances, RA's, prov funds etc - but limited options to avoid tax (not evade).
If you're in business, lots of options - some less legal than others