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During the Covid-19 pandemic, the Solidarity Fund was established as a Public Benefit Organisation (“PBO”) with a mandate to support the national health response, contribute to humanitarian relief efforts and mobilise South Africans in the fight against Covid-19.
As an approved section 18A organisation, the Disaster Management Tax Relief Administration Act and the Disaster Management Tax Relief Act allowed for an additional 10% donation deduction for any contribution made to the Solidarity Fund for a specific time during the 2021 year of assessment.
Donations could be made through two different options:
- Direct donations to the Solidarity Fund; or
- Via “payroll giving” by employers on behalf of their employees.
The normal donation deduction is limited to 10% of an individual’s taxable income before the donation deduction. This special donation dispensation is effectively adding a further donation deduction of 10% for any donations made to the Solidarity Fund, but only for donations made during the period 1 April 2020 to 30 September 2020. Any donations made during the periods 1 March 2020 to 31 March 2020 and 1 October 2020 to 28 February 2021, to any other approved section 18A organisations will be subject to the normal 10% donation limitation.
Any donations made that exceeded either of the donation limitations will be carried forward to be utilised in the following year of assessment until it has been exhausted.
What do you need in order to claim this donation deduction?
Similar to any other donation, you would need a Section 18A donation certificate from the Solidarity Fund. If you have not received one already, you can apply for this on the Solidarity Fund’s website.
What is important to note is that there is a different field in the tax return to capture your donations made to the Solidarity Fund and should not be combined with your other donations made during the 2021 year of assessment.
It is also important to note that you should not be duplicating any donations declarations made via the “payroll giving” option. You would have already received the benefit of this deduction in your monthly payroll as this would have effectively reduced the amount of Pay-As-You-Earn (“PAYE”) on a monthly basis and increased your net pay as a result.
If you have made a donation to the Solidarity Fund via the “payroll giving” option, the amount that you authorised/requested your employer to deduct from your salary and donate on your behalf should appear on your 2021 IRP5 tax certificate.
In theory, taxpayers who made use to the “payroll giving” option should not be required to do/declare anything in addition relating to their Solidarity Fund donations, but as with all things in life, it is not always this simple.
SARS has informed their stakeholders that there is a problem with this functionality. It appears as if these donations did not pull through to the taxpayer’s annual tax returns. SARS has informed their stakeholders that the employers would be required to download an amended version of e@syfile and resubmit their payrolls to SARS.
We advise any taxpayers that have made use of the “payroll giving” option to contact their employer to ensure the donations made are reflected appropriately.
Engela Crocker
Regional Divisional Director: Tax, Johannesburg