Cases of e-filing fraud, identity theft andthe wrongful classification of taxpayers as provisional taxpayers are among the “serious issues” that the Tax Ombud dealtwith in his first term in office.

This is according to the ombud’s firstannual report, which covers the office’sfirst six months.

The Office of the Tax Ombud waslaunched in October last year to provide afree and impartial service for taxpayerswho have been unable to resolve problemsthrough the appeal processes offered bySouth African Revenue Service (SARS).

The ombud is Judge Bernard MakgaboNgoepe. He reports to the Minister ofFinance and is independent of SARS.

Over six months, 670 taxpayers madecontact with the ombud’s office, but only 61of them were valid complainants.

Judge Ngoepe says the low number ofvalid complaints is less indicative of goodservice levels at SARS and more indicativeof low levels of awareness of his office.

“It may well be that SARS is doing agood job, but ours is a new office – mem-bers of the public don’t know much aboutus or our mandate, and therefore don’tknow what we can or can’t do for them. Youapproach an institution that you believecan help you. But if you look at the grossnumber of approaches (670) – that’s morethan 100 a month, which is not bad for anew office.”

The numbers show that people need to

be told more about his office, and in partic-ular about its mandate, Ngoepe says (see“What the ombud can and can’t do”, right).

Of the 670 approaches received, 77 per-cent (514) were enquiries; 10 percent (64)fell outside his office’s mandate and wererejected as invalid, and four percent (31)were noted as “concerns”.

The report describes “concerns” ascomplaints that arose more than a yearbefore the appointment of the ombud,which the ombud was not allowed toreview. But Advocate Hanyana Eric Mkhawane, the chief executive of theombud’s office, says these complaints were valid and raise “important systemicissues. We got approval from the ministerto look at those cases, so some have beenaddressed and raised with SARS.”

Of the 61 valid complaints received,only 63 percent (40) were resolved.

On the high percentage of unresolvedcomplaints, Ngoepe says matters don’t lie

entirely in the ombud’s hands. “We willrefer them to SARS and they may call for alegal opinion. In some instances you findthat the taxpayer doesn’t provide all thenecessary information at once. It’s a com-bination of factors. But it doesn’t take usthat long to finalise a matter.”

The ombud’s office aims to resolve com-plaints within 15 business working days ofsubmitting them to SARS.

SERIOUS ISSUESThe annual report segments complaintsinto three categories – serious issues, sys-temic issues and emerging issues – andprovides cases in each category. Some mat-ters fall into more than one category. Forexample, e-filing fraud is both a seriousand a systemic issue.

The report notes a “lack of sufficientsecurity within SARS systems to prevent e-filing fraud”. In one case, a company’sbank details were changed – by way offraudulent e-filing – resulting in a refund

being paid into a third-party account.Despite several attempts by the company todeal through SARS, including providingSARS with the necessary proof and docu-mentation as requested, “no feedback wasreceived on the progress of the investiga-tion”. The ombud recommended to SARSthat it finalise the matter, and it wasresolved within three days .

In another case involving a companyand e-filing fraud, the result of its com-plaint to the ombud wasn’t as favourable.The company submitted its income taxreturn via e-filing, without completing itsbanking details. About three months later, a fraudulent return was submittedwith banking details and the name of anunknown public officer. The company’sbanking details were updated according to the information on the fraudulentreturn and the refund was released intothat account.

The ombud’s report states that the com-pany reported the matter to SARS and it

was escalated to the SARS Service Monitoring Office. Despite numerous fol-low-ups to SARS, no feedback was forth-coming. The ombud’s office asked SARSfor an update on the investigation and toexplain why it had not paid the company therefund, but the matter has yet to be resolved.

Individuals also fell victim to e-filingfraud. The report says SARS’s system is“failing to prevent fraudulent e-filing pro-

files from being opened under taxpayers’names, resulting in fraudulent income taxreturns being submitted and fraudulentrefunds released”. In the case of a taxpayerwho was not an e-filer, two fraudulent pro-files were opened under the taxpayer’s IDnumber with different particulars. Theombud’s office is evaluating the complaintand has not yet forwarded it to SARS, thereport says.

Identity theft is another serious issueand “SARS is finding it difficult to preventidentity theft on their system”, the reportsays. In one case of identity theft, a fraud-ster submitted a fraudulent return in thetaxpayer’s name. This resulted in a dupli-cate assessment for that year. In order tosecure the refund, fraudulent documenta-tion for a new bank account was submittedat a SARS office.

Despite numerous follow ups, no feed-back was forthcoming from SARS. Follow-ing the ombud’s recommendation to SARSthat it finalise its investigation, the refundwas released. The matter took 35 days to be resolved.

The report says that SARS’s process ofbank detail validation has significantlyimproved to ensure that only the taxpayerand their authorised representative canrequest changes to banking details.

Ngoepe says that e-filing fraud andidentity theft are very serious, but isemphatic that they are not common prob-lems. “I wouldn’t want taxpayers to panic,but even one such case is serious,” he says.

“[Our office] is required to identifytrends and categorise issues. The idea isthat SARS should be able to get the mes-sage and put its house in order.”

The Tax Ombud’s mandate is to addresscomplaints about service, procedural oradministrative matters that you have beenunable to resolve with SARS. You must haveexhausted SARS’s internal complaintsystems before approaching the ombud.

There are limitations to the ombud’sauthority. For example, he may not review:

◆Legislation or tax policy;◆SARS policy or practice generally

prevailing, other than to the extent that itrelates to a service, procedural or

administrative matter;◆A matter subject to objection and

appeal under a tax Act, except for anadministrative matter relating to suchobjection and appeal; or

◆A decision of, a proceeding in or amatter before a tax court.

Recommendations made by the ombudare not binding on taxpayers or SARS. If you,as a complainant, are not satisfied with theoutcome of your complaint, you are free topursue other channels of redress.

2 SATURDAY STAR October 25 2014

WHERE YOU LIVE SHOULDN’T MAKE ANY DIFFERENCE TO THE QUALITY OF ADVICE YOU GET.We believe you should receive the same quality advice someone might get in the tallest building in the biggest city.

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regardless of where you live. For more information, call 0800 551 552, email wealth@psg.co.za or visit psg.co.za

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YOUR QUESTIONS ANSWERED

How to bequeathmy living annuity Assume I have a substantial living annuityand two daughters – let’s call them Amandaand Christine – who are over 30 years old. Ido not have a surviving spouse, and I wanteach of them to have half the income frommy living annuity after my death. Amanda isnot able to manage her financial affairs, so Iwant to name her trust as one of thebeneficiaries, with half the funds providingan income for the rest of Amanda’s life, andChristine as the second beneficiary with theremaining half. Is this possible?

Will Amanda’s portion be classified aspart of my estate and attract estate duty?

Will I have to submit a copy of the trustdeed to the linked-investment servicesprovider to satisfy it that the trust is for thebenefit of a natural person?

If acceptable, will the proceeds be paiddirectly to both beneficiaries, instead of thetrust portion being paid into my estate?

Can you suggest any other way ofpassing on a portion of a living annuity to afinancially incompetent beneficiary withoutpaying capital gains tax, estate duty or pre-retirement tax if Amanda’s 50 percent is paidinto my estate as a lump sum, in order formy estate to pass the benefit on to Amandaas an income for life?

Name withheld on request

Riaan Strydom, a financial adviser at PSGWealth in Mill Park in Port Elizabeth,responds: If a beneficiary is nominated, aliving annuity is excluded from yourestate for the purposes of calculatingexecutor’s fees and estate duty. Yourliving annuity will be allocated to yournominated beneficiaries in theproportions reflected on beneficiarynomination form.

Unfortunately, you cannot dictate theoption the beneficiary may exerciseinsofar as payment of the benefit isconcerned. If you nominate Amanda as abeneficiary, she will be able to withdrawher entire benefit as a cash lump sum andsquander the after-tax amount.

Alternatively, you can nominate atrust, of which Amanda is a beneficiary,as the beneficiary of your living annuity. Atrust itself may not own a living annuity,so any benefit payable to the trust interms of a beneficiary nomination formwill, under normal circumstances, be paidout to the trust as a lump sum and taxed.However, some product providers allowthe trustees of such a trust immediatelyto vest the rights to the living annuity in anatural person beneficiary of the trust.This beneficiary can then transfer thebenefit to a separate living annuity orguaranteed life annuity without having topay tax on the benefit.

If this is the case, the trustees couldattach any condition they deem fit tosuch a vesting of rights. They could, forexample, determine that the benefit fromyour living annuity can be invested inAmanda’s name only if she uses theentire benefit to buy a guaranteedcompulsory life annuity. If she does notaccept the conditions, the trustees havethe right to receive the full benefit as alump sum, and to have it taxed andinvested in the trust.

It is clear that your main concern isAmanda’s protection. Considering herage and life expectancy, myrecommendation is to nominate the trustas the beneficiary and amend the trustdeed if possible. The amendment shouldreflect the terms under which a livingannuity benefit can be vested in thehands of the beneficiary and it cannominate the specific beneficiary. One ofthe terms could be that she purchases aguaranteed life annuity with an annualincome escalation. This is the best way ofprotecting her income for life.

What to do withR500 a month I am 55 years old and seven years awayfrom retirement. I am in a low- to middle-income bracket. I owe R200 000 on myhome loan, but have no other debt.

I have about R1.4 million in my

occupational retirement fund, which will payout when I am 63, but I have no othersavings. I have R500 to spare each month.Should I use it to pay off my home loanfaster, or should I take out a retirementannuity (RA)? What is the best way to usethe R500 over the next seven years?

Name withheld on request

Tommy Ferreira, a financial adviser atPSG Wealth in Northcliff, Johannesburg,responds: You have three options:

1. Increase your contributions to yourretirement fund by R500 a month;

2. Invest R500 a month in an RA; or3. Increase your home loan payments

to repay your loan faster.The first and second options will

increase your retirement savings andmove you closer to your savings goal. Anincrease in your pension fundcontribution will be administered by youremployer and will be deducted from yoursalary. An RA will be funded by your after-tax income.

However, if I understand yourcircumstances correctly, the third optionwould be the best. It is prudent to makepaying off debt your first priority,particularly when interest rates are rising.If you can, you should recalculate yourhome loan repayment term to sevenyears to ensure that you will be debt-freewhen you reach retirement. Debt can bea drag on your income in retirement andshould be avoided.

Are investmentfees deductible?When one invests in a property to rent, allthe expenses are tax-deductible – forexample, levies, rates, managing agent feesand cost of repairs. Why is it that when oneinvests with a financial institution, themanagement fees/expenses are not tax-deductible?

H Hemingway

Peter Stephan, the senior policy adviserat the Association for Savings &

Investment SA, responds: For an expenseto be tax-deductible, it needs to meet thegeneral deductions provisions of section11(a), read with section 23(g), of theIncome Tax Act. One of the provisions isthat it must be expenditure incurred in theproduction of trade income as defined inthe Act. This would include renting out aproperty, but it excludes an individualmaking an investment, unless you aredoing it as part of your occupation.

Section 23(g) states that money mustbe expended for the purpose of trade,and is deductible only to the extent thatthis is so. Trade requires some sort ofactive occupation rather than the passiveearning of investment income.

Transferringmoney offshoreI read with interest the response from MariusCornelissen to Peter Rodgers’s question [ontransferring funds offshore] in PersonalFinance (“Advice for a sojourn abroad”,September 13) . Please clarify two points:

1. To use the R1 million allowance, doyou have to be in South Africa, or can youdo so from overseas?

2. Is it necessary to define “overseastemporarily”? How long is “temporary”?

Ken Gautier

Marius Cornelissen, a financial adviser atPSG Wealth in Menlyn, Pretoria,responds: South African residents whowant to move abroad temporarily areentitled to the discretionary allowance ofR1million in the calendar year ofdeparture. You can obtain the allowancefrom inside or outside South Africa, but itmust be in the calendar year of departure.

The South African Reserve Bank’sexchange control manual defines a“resident temporarily abroad” as anyresident who has left the Republic for anycountry outside the Common MonetaryArea, with no intention of taking uppermanent residence in that country, butexcluding those residents who areabroad on holiday or business travel.

The time spent abroad is not at issue;the definition hinges on whether or notyou intend to return to your permanentplace of abode.

Preservation fundsand emigrationIn response to a query about a withdrawalfrom a preservation fund on emigration(“Access to a preservation fund”, Personal Finance, July 12) Old Mutual said:“In 2012, the [Income Tax] Act was amendedso that a member who withdraws a portionof his or her pension benefit before transferto a preservation fund will be entitled to afurther withdrawal at a later stage. Thismeans that your son is now allowed to makea full or partial withdrawal from thepreservation fund.”

I thought that the withdrawal onemigration had to be done before age 55. Ifnot, the funds cannot be taken and must beused to buy an annuity. Is this correct?

Name withheld on request

Shreekanth Sing, legal adviser at PSGWealth, responds: Fifty-five is theminimum retirement age. A member isnot forced to retire at 55 and is entitled to a once-off withdrawal any time before retirement.

If a member has taken his once-off,pre-retirement withdrawal, the membermay have access to his or her benefitsagain only upon retirement.

Only retirement annuities (RAs) are allowed to be accessed uponemigration.

If a member has already taken theonce-off pre-retirement withdrawal and is emigrating, the solution is to transferthe preservation fund benefit to an RA viaa section 14 transfer, consolidating allretirement benefits into one vehicle thatis accessible on emigration.

We ask experts to answer your financial queries. Email queries to perfin@inl.co.za or fax to 021 488 4119. Feature sponsored by PSG Wealth

EXCHANGE RATES TO 24/10/2014

These rates are subject to market fluctuations and are applicable foramounts up to R160 000.These rates are for indication purposes only, andneither Nedbank nor Personal Finance accepts any responsibility for anydecisions based thereon. Source: Nedbank. Quoted at 7.52am

USA 10.8000 10.7817 10.7738 11.1500UK 17.2854 17.2518 17.2402 17.9192Australia 9.3371 9.2937 9.2251 9.9108Canada 9.5238 9.4787 9.4697 10.0503China 1.7373 - - 1.8536Denmark 1.8129 - 1.8077 1.9175Euro 13.6231 13.5936 13.5815 14.1538Hong Kong 1.3763 - 1.3725 1.4560India 0.1743 - - 0.1847Israel 2.8169 - - 3.0111Malawi 0.0235 - - 0.0255Mauritius 0.3380 - 0.3345 0.3682New Zealand 8.2988 8.2645 8.2305 8.9366Norway 1.6111 - 1.6062 1.7331Seychelles - - - 0.8433Singapore 8.2781 8.2508 8.2305 8.9206Sweden 1.4715 - 1.4674 1.5555Switzerland 11.1483 11.1111 11.0988 11.8765Thailand 0.3121 0.3104 0.3087 0.3691

COUNTRY BUYING RATES SELLINGTelegraphic Traveller’s Bank

transfer cheques notes

INTEREST RATES TO 24/10/2014MONTHS

1* 3 6 9 12 24 Absa Bank 4.74 4.76 5.75 5.25 6.25 6.70African Bank – 5.83 6.27 – 6.81 –Bidvest Bank 5.30 5.50 5.80 6.20 6.80 –Capitec Bank – – 6.00 – 6.45 7.90F N B – 5.10 5.75 – 6.25 7.00GBS Mutual Bank – – 5.40 5.61 7.23 –Grindrod Bank 5.85 5.95 6.50 6.65 6.90 –Mercantile Bank 5.00 5.20 6.00 – 6.50 –Nedbank 5.10 5.30 5.80 5.80 6.70 7.75Sasfin 6.00 6.10 6.70 – 7.10 –Standard Bank 5.00 5.10 6.03 – 6.10 –

*One-month rate applies to fixed deposits only and not to noticedeposits. Senior citizens may qualify for an extra 0.5 percent onsome 12-month investments. All the rates quoted are for interestpaid monthly, apply to investments from R50 000 to R100 000and are correct at the time of going to press.

Source: Personal Trust (independent agents fordeposit-taking institutions). Telephone 021 689 8975

ANNUITY RATES TO 24/10/2014The following rates are based on a compulsory purchaseprice of R100 000 for people born 01/01/1954 payablemonthly in arrears, guaranteed for 10 years.

The following rates are based on a voluntary purchase price .

These rates are valid on a daily basis. E&OESource: Computerised Pension Bureau. Telephone 011 482 3625

MaleDiscovery R730.99Liberty Life R776.37Metropolitan R800.51Momentum R783.15Old Mutual R785.65Sanlam R799.14

FemaleDiscovery R690.04Liberty Life R724.04Metropolitan R735.46Momentum R742.82Old Mutual R731.43Sanlam R751.11

MaleDiscovery R730.99Liberty Life R776.37Metropolitan R754.73Momentum R773.88Old Mutual R785.65Sanlam R799.14

FemaleDiscovery R751.11Liberty Life R724.04Metropolitan R699.66Momentum R735.46Old Mutual R731.43Sanlam R730.58

RSA RETAIL BONDS: OCTOBER 2014FIXED-RATE BOND*Two years . . . . . . . . . . . 7.25%Three years . . . . . . . . . . 7.75%Five years . . . . . . . . . . . 8.25%* Rates are set every month.

INFLATION-LINKED BOND*Three years . . . . . . . . . .1.00%Five years . . . . . . . . . . .1.25%Ten years . . . . . . . . . . . .2.25%* Rates are in addition to capitaladjusted for CPI twice a year.

Source: National Treasury.Website: www.rsaretailbonds.gov.zaTelephone: 012 315 5888. Email: queries@rsaretailbonds.gov.za

Note: Personal Finance welcomes generalquestions, but if you require specific financialadvice, please consult an adviser. Letters andresponses may be edited.

The Office of the Tax Ombud says there is no reason to panic, butSARS must get its house in order, writes Angelique Ardé.

The tax ombud offers the following advice to taxpayers:

◆Understand the mandate of theombud. In assessing your complaint, theombud’s office may help by indirectlyaddressing other issues. “For example,SARS may have given you wrong advice,which you acted on. It’s a service issue,even if the main dispute falls outside ourmandate. Addressing service issues mayfast-track the resolution of another issue,”the ombud says.

◆Be responsive to SARS, the ombudsays. Don’t ignore SARS.

◆Check your assessment and makesure you understand it. Ultimately, you areresponsible for it.

◆ If you owe SARS money and youcan pay it, don’t put it off, or you will owe much more in the long run. If youdon’t have the money, make anarrangement with SARS, but don’t ignorethe problem.

CONTACTThe Tax Ombud is JudgeBernard Makgabo NgoepePhone: 080 066 2837 or 012 431 9105/6Fax: 012 452 5013Email: office@taxombud.gov.zaPost: P O Box 12314, Hatfield, 0028

What the ombud can and can’t do

OMBUD’S TIPS

Tax ombud listse-filing ID theftas ‘serious’ issue

PERSONALFINANCE