By Pieter van Heerden – Director: Ascendant Financial Services
With a skyrocketing cost of living and an ongoing energy crisis, most South Africans are desperately looking for new and innovative ways to save money. Luckily for you, the bright minds here at Ascendant Financial Services have come up with a few excellent new ideas to do just that by way of tax reductions. Here are a few ways, including one rather surprising one, to reduce your tax as a South African and to have a few more rands in the bank this year:
- Retirement annuity. If you make contributions towards a pension, provident fund or retirement annuity, you can also claim deductions on taxable income.
- Tax-free investments.
- Travel claim.
- Solar panels!
Kill two birds with one stone! Now you can avoid load-shedding and simultaneously reduce your amount of tax payable to SARS with the new rebate scheme for rooftop solar panels.
Here are the details of the good news, brought to you by Ascendant:
Individuals who install new, unused rooftop solar panels from 1 March 2023 will be able to claim rebates equal to 25% of the cost of the panels, up to a maximum of R15,000.
To take advantage of the total tax incentive, you’ll need to invest in solar panels worth at least R60,000.
Here’s a practical example. Suppose you pay an average of R2,500 per solar panel. In that case, you’ll need to buy 24 panels to benefit from the maximum rebate. (R2,500 x 24 = R60,000)
If the average home uses between five and ten solar panels at a cost of between R12,500 and R25,000, homeowners can claim a rebate of between R3,125 (R12,500 x 25%) and R6,250 (R25,000 x 25%).
The tax deduction does not apply to inverters or batteries, because the government wants to promote additional energy generation.
The rebate is available to the person who pays for the system, so it is not confined to property owners. However, body corporates do not qualify.
How do I claim my solar tax credit 2023?
Individuals will be able to claim the rebate if they have:
- A VAT invoice that indicates the cost of the solar PV panels separately from other items, along with proof of payment.
- A CoC proving that the solar PV panels were brought into use for the first time between 1 March 2023 and 29 February 2024.
- Only new and unused solar panels will qualify, and they can be installed as part of a new installation or as an addition to your existing solar system.
- Solar panels must have a minimum capacity of 275W per panel.
- The solar panels must be installed at a primary residence that is mainly used for domestic purposes.
- Installation must be accompanied by a valid Certificate of Compliance (COC) to ensure safety compliance.
- A recent draft Third Party Returns of Information notice issued by SARS for comment required persons issuing these certificates to submit third party returns to SARS with, among other things, the tax numbers of the recipients of these certificates.
- Solar panels must be part of a system connected to the residence.
Understanding solar tax rebate calculations is important because it can significantly reduce the initial cost of installing a solar system and make it more financially viable.
How will you receive the tax rebate?
There are two ways to claim the rebate:
- If you are employed, you must include this in your income tax return for the year ending 28 February 2024 (from 1 July 2024).
- If you are a provisional taxpayer or self-employed, you will need to deduct this in your provisional tax returns (February and August 2023) and in the final income tax return for the year (from 1 July 2024).
It’s important to note that you must pay income tax to receive the income tax rebate.
Speak to Ascendant Financial Services to assist you with your income tax returns.