Every year, the Minister of Finance adjusts the aspects affecting the taxable liability of both persons and businesses.
According to the Financial Planning Institute the below are some of the highlights from the 2014/2015 National Budget Speech, pertaining to individuals specifically:
Retirement fund withdrawals
The retirement funds lump sum withdrawal tables tax-free portion has increased marginally to R25 000. The retirement funds lump sum benefits and severance benefits table tax-free portion has increased to R500 000.
The medial aid tax credit has been increased from R 242 to R 257 per month for the member and first dependant and from R 162 to R 172 for subsequent dependants.
Income Protection Policies
These are no longer tax deductible.
The budget speech (Tax)
Although the abovementioned examples (highlights) only relate to personal taxes, the taxable implications involved in day to day transactions should be as carefully considered as the implications for capital (larger or once off/rare) transactions are.
Generally speaking, business owners tend to carefully consider the larger/rare transactions and the taxable implications of those. Unfortunately, however, the day to day transactions – even those they enter into for personal gain such as taking out an income protection policy on the premise that it ring fences personal risk and further is also tax-deductible – are rarely considered.
Similarly, when structuring our personal affairs we should consider these implications, even if they do not directly influence our businesses. This for the simple reason that; overburdening our personal finances as a result of overpaying in taxes or mistakenly thinking that something is tax-deductible while it is in fact not, may result in an indirect or “knock on” effect burden on our businesses.
Importantly, however, business strategic planning and estate planning (including the implication of personal taxes) should not only be engaged to save on taxable liability in a lawful manner. The purpose should be much greater.
Estate planning involves the consideration of personal wealth management strategies, the implication of death taxes (e.g. estate duty) and setting up / updating a will.
These personal wealth management strategies further includes aspects involving updating your personal insurance (such as life insurance, retirement planning and income protection), further ring fencing risk by marrying with an antenuptial contract and using trusts where suitable.
Further to this, and in my view, sound estate planning is an absolutely inseparable from business continuity planning or succession planning strategies.
Estate planning ensures that the business owner’s heirs (dependents) are well looked after and in that way preserves his/her legacy.
From the business’ side, business continuity planning often overlaps with the business owner’s estate planning, specifically where this is done in order to ensure that the business survives the passing of its key role player. In that way, a legacy is protected from both the business and personal perspective.
Ring fencing risk
Although the above-mentioned aspects inevitably constitute a limitation of or ring fencing risk, this should not deter the focus from the obvious. Businesses must comply with certain regulations, it should be structured optimally and its survival should be strategically secured when the inevitable, death and taxes, occur.
For that reason, business owners should focus closely on the aspects of the annual budget speech.
They should furthermore ensure that personal estate planning and business continuity planning align together with other risk aversion strategies so as to protect both themselves and their businesses.
That way, businesses are able to grow safely. By way of explanatory and concluding comparison, the business would be protected in the same way sea swimmers are by shark nets. So that they are free to swim as much as they want – safely.
Reimagine The Use Of Technology
The phenomenon of ‘big data’ is rapidly catching up with the world of tax.
Get Your Small Business VAT-Ready Without The Headache
On 1 April 2018, Value-Added Tax (VAT) will increase for the first time in 25 years, from 14% to 15%. Viresh Harduth, Vice President: New Customer Acquisition (Start up and Small Business) at Sage Africa & Middle East, guides this transition.
If you’re a small business owner, it’s likely that you’ve never had to deal with a change in the VAT rate before and don’t know where to start to get your systems and processes VAT-ready, without impacting your cash flow and operations.
Here are a few tips to get your small business VAT-ready, come 1 April:
Test your operation
If you are a small business that still uses manual processes like spreadsheets to calculate and record VAT, consider creating dummy sheets and invoices to ensure you are processing the additional VAT correctly and that you can process transactions at 14% on 31 March and 15% on 1 April.
Also consider that, if a customer returns a product on 1 April that they bought on 31 March, it will need to be refunded at the old VAT rate.
NOTE: From 1 April, all receipts, invoices, quotes, adverts, credit and debit notes must reflect the new rate, so test your systems beforehand to make sure there aren’t any errors.
Understand time of supply
The transaction date, or time of supply, is probably the biggest consideration for businesses when applying VAT to sales. The VAT Act stipulates that the time of supply will be either when an invoice is issued or when payment is received – whichever happens first.
For example, if you invoice for a sale on 31 March but are only paid on 2 April, the VAT rate of 14% will apply. If you receive payment on 1 April but have not yet invoiced for the sale, then VAT should be charged at 15%.
NOTE: Consult the VAT Act for rate-specific rules applicable to contracts and supplies starting before and ending on or after 1 April.
Automate where possible
Cloud-based, automated accounting solutions, like Sage One, will be VAT ready, come 1 April. Businesses using these solutions don’t have to worry about staying on top of the different VAT rates because the system will automatically generate the correct VAT invoice, quote and debit or credit note.
NOTE: All transactions are stored and readily accessible in the cloud, from anywhere, ensuring businesses are compliant with SARS and VAT laws.
Educate your colleagues
It’s crucial that your team members know how to raise invoices and credit notes that are processed before and after 1 April, and how to process refunds for sales that occurred before this date, as these will attract different VAT rates.
Adjust your pricing
The VAT Act states that displayed pricing and adverts must include VAT (unless the product is zero-rated). Some small businesses might want to close shop for the day to adjust their shelf and online pricing to reflect the new rate in time for the new business week on Monday.
However, those that are unable to do this can display a notice at the till point, stating that prices do not include VAT at the new rate and will be adjusted at the tills.
NOTE: This grace period is only in place until 31 May, after which all pricing must include the new rate.
Check your own quotes and invoices
Any quote or invoice you receive for stock purchased after 1 April should reflect the new VAT rate. You’ll need to submit this documentation when claiming input tax. If your supplier does not calculate VAT correctly, you will be liable for the shortfall, which could impact your cash flow.
NOTE: You will also incur penalties if you under- or over-declare VAT on your VAT201 return – another reason why automating the accounting process is a good idea.
Get reporting ready
The next VAT201 return you submit to SARS will be more complicated because you will need to calculate input and output tax at different rates, not to mention the apportionment rate that will need to be calculated for contracts and services taking place before and after 1 April.
NOTE: Again, automated solutions can take care of this for you but, if you’re using manual processes, you might need to consult an accountant to make sure you’re not over or under reporting VAT on your reconciliations.
Complying with the new VAT rate is a massive administrative task for businesses of all sizes – and they don’t have much time to prepare. To find out how Sage can help your business with compliance, click here.
Sage Reports On How Payroll Compliance Is To Come Under Scrutiny
Expect the South African Revenue Service (SARS) to clamp down on non-compliant business and personal taxpayers as government struggles to fill a large budget deficit says Rob Cooper, tax expert and Director of Legislation at Sage.
Ensure that your payroll is fully compliant with the laws and regulations around collection of PAYE, as government looks to plug revenue holes.
While you may have previously gotten away with non-compliance, whether unwittingly or otherwise, the law is tightening around payroll compliance and you need to be prepared. Government is focused on acquiring funding for infrastructure investment and social spending, but what does this mean for your business?
Tax compliance ruled with a firmer hand
Accounting for more than a third of tax revenue, personal income tax is the single largest contributor to fiscal revenue. SARS has done a good job over the years of bringing employers into the tax net and catching those that don’t comply with the tax regulations and legislation.
Those few companies that are not in full compliance can expect to see the tax authority take an even more robust approach to enforcing compliance.
Timely and accurate submissions keep you in the clear
To remain compliant, businesses must ensure that they register all employees for tax, declare the correct earnings for all employees and include correct calculations of other earnings, deductions (such as PAYE and UIF), and contributions (such as retirement funding or UIF contributions) in their payroll. They must also make sure that annual returns are filed and submitted promptly and accurately.
The risks of getting it wrong include:
- Interest or fines by authorities (SARS, department of labour, a labour court etc.)
- Imprisonment in cases of fraud or extreme negligence.
What’s more, compliance is complicated by annual changes in payroll legislative requirements.
Automation solves compliance challenges
Because compliance is complex and the risks of non-compliance are high, even smaller South African businesses can no longer rely on spreadsheets and other manual methods to do their payroll calculations and file returns.
Automated solutions are becoming more essential for keeping reliable records and performing accurate payroll calculations.
Payroll automation software — with solutions available for businesses from start-ups to medium-sized companies and larger enterprises — takes care of calculating the complex formulas for the various deductions, generating compliance reports, and keeping accurate records.
That makes it easier to perform accurate calculations, file submissions on time and generate reports and electronic payslips.
Eliminate manual paperwork
Payroll software takes the pain out of compliance, allowing you to focus your energy on strategy, customers, and employee engagement rather than on red-tape.
While mistakes in record keeping and compliance can result in punitive penalties and hurt the company’s brand, an efficient payroll system enhances staff morale, helps to reduce the risks of fraud, and boosts an organisation’s reputation.
It is a worthwhile investment in the business and a foundational element of good governance and sound financial control.
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