How the 2012 Budget Impacts SME Owners

How the 2012 Budget Impacts SME Owners

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Kobus Engelbrecht, marketing head for Sanlam Business Market, notes some of the key aspects of the National Budget in relation to business owners:

An end to secondary tax on companies

A key change is the implementation of dividend withholding tax on 1 April 2012. This will bring an end to secondary tax on companies, and entails that dividend withholding tax at 15 % will be paid on any dividend paid out to the shareholders of the company.

The inclusion rate with regard to capital gains tax for companies and trusts (other than special trusts) would increase to 66.6 %. This will raise the effective capital gains tax rate to 18.6% for companies, and to 26.7 % for trusts (other than special trusts).The tax exclusion amount on the disposal of a small business when a person is over the age of 55, will rise from R900 000 to R1 800 000.The market value of assets allowed for a small business disposal for business owners over 55 years of age increases from R5 million to R10 million.

Good news for micro businesses

Businesses with a turnover of less than R1 million (micro businesses) are likely to welcome Minister Gordhan’s announcement that they will be given the option of making payment for turnover tax, VAT and employees’ tax at twice-yearly intervals from 1 March 2012. The Minister further announced that businesses in this category would be able to file a single combined tax return on a twice-yearly basis from 1 March 2013. This essentially means that the number of returns required for these taxes will fall from about 18 per year to only two a year.

Tax threshold for small businesses increases

On the other end, it was announced that this year will see an increase in the tax threshold for small business corporations from R59 750 to R63 556. Currently, taxable income up to R300 000 is taxed at 10%. This threshold will now increase to R350 000 and the applicable rate will be reduced to 7%. For taxable income above R350 000, the normal corporate tax rate of 28% applies. These amendments will come into effect for years of assessment ending on or after 1 April 2012.

Potential tax interventions

In an effort to improve governance, streamline procedures and provide more focused support to businesses operating within special economic zones, the National Budget announced the introduction of legislation to build on industrial development zone policy. In support of this initiative, the Minister said the following tax interventions would be explored:

  • A possible reduction in the headline corporate income tax rate for businesses within selected zones (as determined by the Minister of Finance after consultation with the Minister of Trade and Industry);
  • An income tax exemption for the operators of special economic zones; and
  • An additional deduction from taxable income for the employment of workers earning below a predetermined threshold.

The South African tax system is complex and Sanlam urges business owners to employ the services of adequately qualified professionals to help them to comply with the relevant legislation and to assist them to benefit from the allowable deductions.

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