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Insurance: Covering All Bases

Given that insurance is something your business has to have, you might as well make sure you do it properly when you buy it. Here are some tips to help you get it right.

Juliet Pitman

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There is much debate over whether to use a broker or go direct, but for all the pros and cons on both sides, this is a decision that only you can make. A broker may be able to highlight better options that you would otherwise not be aware of, but if you would rather avoid “middleman” costs and are confident enough to make an informed decision on your own, then go direct.

Denis Beckitt, writing for the South African Insurance Association (SAIA), advises that brokers and direct insurance have to be licensed under the Financial Advisory and Intermediary Services (FAIS) Act.

“They must also, without being asked, provide you with full information on what your policy covers and what it excludes, the contact details of the insurance company, the amount of your premium and whether it increases annually, what you must do to make a claim, and inform you that you are allowed to pay premiums up to 15 days late,” he adds.

Current Value

One of the most important things to remember about short-term insurance, particularly if you want to keep your premiums to a minimum, is that the value of items changes over time but that your insurance premium is worked out relative to the value of the item when you insured it. As your asset

depreciates in value, so your premium should come down commensurately, but it’s up to you to regularly alert your insurer to reduce the sum insured.

This applies to technology products that depreciate rapidly, but is particularly relevant to motor vehicles too. Most insurance policies cover vehicles at market value which is halfway between retail value (what a dealer could sell the car for) and trade value (what a dealer could buy the car for). If you want maximum payout in the case of a vehicle write-off, you need to shop around for “retail value” contracts. “Expect of course to pay around 5% more on your premium,” says Beckitt.

Under- and over-insuring

By the same token, you don’t want to under-insure your asset. Insuring it for less than it is worth can leave you seriously out of pocket when you claim. Here’s how. You insure the contents of your office for R100 000 initially. But as the years go by you purchase more items so that the true value of the office contents is R500 000. Four laptops are stolen and you put in a claim for R50 000, all the while believing that you are covered because you have a policy for R100 000. However, because the office contents are valued at R500 000 and you only have R100 000 worth of cover, every R1 worth of goods is only insured for a 20c loss. So you’ll only get R10 000 for your R50 000 claim. Insuring something for more than it is worth, doesn’t pay either. You can’t insure your company vehicle for R120 000 if its market value is R100 000 and expect to get a R20 000 windfall when you claim.

The insurer will only pay claims up to a maximum of the market value of R100 000. The message is clear: keep it real.

Juliet Pitman is a features writer at Entrepreneur Magazine.

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1 Comment

1 Comment

  1. Portia

    Sep 13, 2011 at 13:59

    I just want to understand that this principles apply to property life insurance as well – e.g if one bought a house at R500 000 thousands and then after few years he/she renovates the house add few extras and the value of the property goes up do this person then have to increase their life insurance to current value after all the renovations?

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Tax

7 Direct And Indirect Taxes You Should Consider Before Registering Your Business

Tax planning is critical for us all more so for the success of your newly registered entity.

Kenlin Stride

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If your business has been registered, guess what in the eyes of the law your business is now a legal entity, congratulations. What does this mean? Well this means your business is a distinct legal entity separate from you in the eyes of the law, this means your business can now enter into contracts to purchase assets, utilise debt instruments and hire staff amongst other things. This unfortunately also means your business is subject to tax compliance. Let me try and give you a snapshot of what taxes to be aware of as a business owner however not all will automatically be applicable to your business.

1. Income Tax

Income tax is one of the state’s main sources of revenue and is levied on taxable income determined in terms of the Income Tax Act. All businesses must be registered for Income Tax. It is illegal not to be registered for Income Tax if you have a business.

2. Provisional Tax

The payment of provisional tax is to assist taxpayers in meeting their tax liabilities by way of installments out of their taxable income. Income tax is only paid once the full 12 months of trading is complete. It would be impractical to expect taxpayers to pay one large lump sum of income tax to SARS. Companies automatically fall into the provisional tax system.

Related: Tax Basics For Business Owners

3. Small Business Corporations Tax

SBC Tax was introduced as a tax relief measure for small business. SBC Tax will not be calculated on the flat 28% of taxable income. Dependent on your annual taxable income, you will be liable at the percentages in the table.

4. Pay As You Earn

Employees’ tax refers to the tax required to be deducted by an employer from an employee’s remuneration (salary) paid. The process of deducting or withholding tax from remuneration as it is earned by an employee is commonly referred to as PAYE.

5. Value Added Tax

This is an indirect tax levied on the ‘sale’ and ‘purchase’ of goods and services. This tax is not compulsory unless your turnover has exceeded R 1 000 000 mark however you choose to register voluntarily if it makes sense for your business strategy.

Related: How to Reduce Your Taxable Income

6. Unemployment Insurance Fund

UIF contributions are compulsory for all employees working more than 24 hours a month. The contributions are paid to the Department of Labour (DOL), or can be included in the SARS payment of PAYE on the EMP201

7. Workman’s Compensation

An employer must register with the Commissioner within seven days after the day on which he employs his first employee, (this includes the Director or Owner of the company)

You might be thinking tax compliance, what’s the big deal? I’ve been doing that most of my adult life, well personal tax is very different to business tax. As the director of your newly registered business it is assumed that you have done the research as to what laws to comply with as a business owner. In reality however the thrill of having a business overshadows the mundane compliance elements that go hand in hand when running a business. Let’s face it as much as your business is now a legal entity your business won’t do the research and comply with the necessary taxes on its own that responsibility lies with the director and when I say director I mean you.

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Tax

Tax Refunds – What You Need To Know

You are able to object/dispute any SARS decision not to release the refund on efiling or through your tax practitioner.

Maselaelo Mphela

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Most taxpayers are not aware of the requirements for a tax refund to be facilitated and SARS very often will delay paying out the refund. In this article, we will look at the requirements taxpayers need to be aware of and the Tax Ombud’s report on the investigation into alleged delayed payment of refunds as a systemic and emerging issue in terms of section 16 (1) (b) of The Tax Administration Act No. 28 of 2011 (TAA).

What you need to know as a taxpayer:

  • The tax refund must be claimed within 5 years from date of submission of the return.
  • SARS has the right to withhold the refund as per section 190 (2) of TAA: “SARS need not authorise a refund as referred to in subsection (1) until such time that a verification, inspection or audit of the refund in accordance with Chapter 5 has been finalised.”
  • Authorisation of payment of refund done once SARS is satisfied with the acceptable security provided by the taxpayer in terms of section 190 (3) of TAA: “SARS must authorise the payment of a refund before the finalisation of the verification, inspection or audit if security in a form acceptable to a senior SARS official is provided by the taxpayer.”
  • As a taxpayer, you need to ensure that you verify your banking details with SARS and that there are no outstanding returns in order for your refund not to be delayed.
  • Any decision not to refund by SARS is subject to an objection and appeal by the taxpayer in terms of section 190 (6) of TAA.
  • Refunds less than R100 are not refunded but carried forward to the next tax period.
  • To view the status of your refund you can use the Refund Dashboard on efiling under the ‘Returns History’ tab for the tax period in question or contact the SARS call centre.
  • Interest starts accruing from 21 business days from the date on which the refund became due, i.e. verification/audit outcome finalised.

Related: Tax Basics For Business Owners

Tax Ombud’s Report

The Tax Ombud’s report identified various mechanisms used by SARS to defer or delay the payment of refunds due:

  • SARS failing to link submitted supporting documents at a SARS branch to the main file.
  • The use of special stoppers on taxpayers’ accounts and the delay in lifting the stoppers, e.g. being required to verify banking details in person at a SARS branch. Even after the verification is done, there is still a lengthy delay in paying the refund.
  • Using the filing of new returns as an excuse to block refunds. The system blocks already verified refunds the moment a subsequent return is submitted by the taxpayer.
  • Withholding of refunds for one period while an audit/verification is in progress on another period. This is contrary to section 190 of the TAA.
  • The use of historic returns suddenly reflecting as outstanding but these have never been shown as outstanding on the Tax Clearance Certificate or the Statement of Account.
  • The raising of assessments and passing of journals to absorb credits on taxpayers’ accounts, i.e. overpayments. In doing so, SARS creates fictious tax liabilities instead of making a decision on the refund.
  • Requesting further information during the audit to delay finalisation, thus delaying the time frame from when the interest accrues.
  • No turnaround time for assessments successfully disputed.
  • Obstacles regarding diesel refunds.
  • Raising of assessments prematurely before the 21 days to submit the supporting documents
  • Refunds for periods that have been verified automatically set-off against bad debts on other periods not withstanding a request for suspension or where there is the suspension of payment. SARS may not instate any collection steps from date of submission of request for suspension of payment until 10 days after decision to not grant the request has been communicated to the taxpayer in terms of section 164 (6).

You are able to object/dispute any SARS decision not to release the refund on efiling or through your tax practitioner.

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Company Posts

Reimagine The Use Of Technology

The phenomenon of ‘big data’ is rapidly catching up with the world of tax.

PwC

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As tax professionals we live in a new reality, fueled by the blinding pace of change. The digital revolution is here. Reimagine the future of the tax function through the lens of analytics.

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