As the tax deadline looms, here’s how to pay less (legally)

For many South Africans, tax is something that “just happens” in the background: PAYE is deducted every month, the South African Revenue Service (Sars) issues an assessment, and life goes on. But as February 28 approaches – the end of the tax year – there’s a brief window to take control of your finances and, in some cases, cut what you ultimately pay.

Financial adviser Zander Loots of Alexforbes frames February as more than a deadline. It’s a chance to use the incentives built into the system – where Sars, as he puts it, “effectively helps you save”.

Here’s what matters most.

Get your Sars house in order

Before you chase deductions, make sure your Sars profile is clean and accurate. A tax “diagnostic” review – essentially a compliance health check – can surface issues you didn’t know existed: missing returns, penalties or discrepancies between what you think you filed and what Sars has on record.

Tax Consulting South Africa describes a diagnostic as a way to reconcile your records with Sars, verify personal details and identify risks early – while there’s time to fix them calmly, rather than during a panic when penalties are already accruing.

It won’t reduce your tax bill directly, but it can stop an admin mistake from derailing a refund, triggering a query or turning a straightforward return into an audit headache. “Assumption is the mother of all mistakes. When it comes to Sars, it can be an expensive one,” say Rendani Makatu, an expatriate tax support specialist at Tax Consulting South Africa, and Alex Mahundla, the company’s compliance expert.

Early planning also helps taxpayers take a more strategic approach.

Use the biggest lever: retirement contributions

If you have taxable income, retirement funding remains the most powerful year-end move because it reduces taxable income (not just the tax you pay) and it’s explicitly encouraged in law.

Sars allows a deduction for contributions to retirement funds (including retirement annuities) of up to 27.5% of remuneration or taxable income, capped at R350,000 a year.

Loots says that even if you don’t already have a retirement annuity (RA), you can still open one and contribute before year-end. “If you make any contributions – including a lump sum – before the end of February, Sars will take that into account when you submit your annual tax return,” he tells Currency. He adds that RAs can also offer creditor protection.

If two people both earn R1m, and one of them, Person B, uses their full RA allowance, their taxable income drops to R725,000, while Person A is still taxed at their full salary. (The rebate in the table below refers to a fixed annual amount that Sars subtracts from taxpayers each year.)

One point people often miss is that any excess contributions aren’t wasted. If you contribute above what you can deduct this year, the balance can roll over. Say you contribute R400,000, for example, you can deduct R350,000 now, and the remaining R50,000 rolls over to the next financial year.

If you belong to an employer fund, consider topping up there first. “If you make extra contributions into a company fund … that’s usually the most cost-effective way to do it,” Loots says, because employer funds often have lower costs.

Don’t leave it to the last week

Last-minute contributions increase the risk of missing processing cut-offs – especially amid the February bottlenecks – so they only reflect in the next tax year.

Max out your TFSA room if you can

Tax-free savings accounts (TFSAs) work differently from retirement contributions. They don’t reduce taxable income upfront – but all growth inside the account (interest, dividends and capital gains) is tax-free. There’s no deduction now, but the long-term payoff can be significant.

The annual contribution limit is R36,000, with a lifetime cap of R500,000. Unused annual TFSA allowance can’t be carried forward – miss it before year-end and that year’s space is gone. Confirm how much you’ve contributed this tax year and top up any remaining room if you can.

Other relief exists – but paperwork matters

Beyond retirement funding and TFSAs, the tax system offers other relief. Some are paperwork-heavy, and Sars is strict about proof.

• Medical scheme fees tax credits (and, in some cases, additional medical expense relief): credits are fixed monthly amounts and reduce the tax you owe.
• Donations to approved public benefit organisations with a section 18A certificate: deductible up to limits set in law.
• Rental property deductions (if you earn rental income): certain expenses may be claimed against that income, but you need records and the correct treatment.
• Travel allowance and certain business/commission expenses: legitimate, but substantiation-heavy (logbooks matter). Get this wrong, and it’s the kind of claim that attracts queries.

Loots’s caution is that these “other ways” can become complex quickly, and business owners should consult a qualified tax adviser to determine what truly applies.

Keep the long game in view

For those without lump-sum money available, Loots returns to first principles: South Africans generally don’t save enough for retirement.

“Once you retire, you become self-employed,” he says, because you must rely on the assets you’ve built to pay your own “salary” after your employer stops doing so. “You can’t eat the bricks of your house,” which is why starting with your future self matters.

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• Tax first, investments after
• Sars sharpens expat tax scrutiny: Here’s what to do

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