With the many challenges small business owners face every day, being tax compliant is often not at the top of the list and tax deadlines often come and go in the struggle of trying to keep the business afloat.
When they do get around to completing their tax returns, they often go it alone, often not realising that business tax returns are far more complicated than individual returns. Research conducted by TaxTim shows that 58% of small businesses do not get professional help when submitting their annual tax returns. In fact, only 13% handed the role over to an outsourced professional.
Marc Sevitz, co-founder and CFO of the online tax return tool TaxTim, says that SMEs do not have one standard deadline for submission to SARS. SMEs must complete their annual tax returns within 12 months of the end of their financial year, which can be any time from January to December.
Sevitz, a Chartered Accountant and registered tax practitioner, offers TaxTim’s top tax tips for SMEs:
1Record every cent earned or spent
Whilst it may sound like an administrative headache, keeping an accurate and up-to-date record of your business’s income and expenses, allocated to their various categories, is critical to ensuring a smooth tax return. The nature and size of your business will determine whether you’d want to look at investing in an accounting software or package, or if a basic spreadsheet record will suffice.
2Keep all your slips
Keep all documents relating to income and expenses, such as invoices and receipts, and file them in a logical order. Should SARS request verification on your business’s tax return, you’ll easily be able to supply these.
Scrambling around to find slips from the past year can easily be avoided.
3Make copies of documents
It’s best to keep both a hard copy and electronic version of documents. Scanned copies can be stored online using cloud services like Google Drive or Dropbox, which ensures they’re safe, even if the originals get lost or if your computer is damaged or stolen.
4Store documents for five years
Don’t toss away your documents once you’ve filed your business tax return. Legislation requires that SMEs keep all relevant documents for a minimum of five years. SARS may request a review of previous tax returns and you don’t want to be missing vital documents that impact your business’s tax liability.
5Use the correct rates for depreciation
If your business owns assets that devalue over time, be sure to use the correct wear and tear rate from SARS’ list of different asset types. For example, computers depreciate at a different rate to vehicles. Also, check whether your business qualifies for the Small Business Corporation or Section 12C Manufacturing Assets special wear and tear allowance.
6Know all the allowed deductions
There are numerous deductions and allowances available to SMEs. It is in your best interest to familiarise yourself with them to ensure you never pay more tax for your business than necessary. For example, a business can claim an allowance for a building that it owns, or special tax deductions for leased assets.
7Provide properly for provisions
Remember that accounting provisions are treated differently for tax purposes. Ensure you reverse the Provision for Leave Pay and Provision for Employee Bonuses in your business’s tax calculation as these are only deductible for tax once they’ve been paid.
Says Sevitz: “TaxTim now offers a tax return tool for small businesses in SA with annual turnovers of up to R1-million. It offers taxpayers the convenience of filing their tax returns online combined with the step-by-step guidance of Tim, a digital tax assistant, at a fraction of the cost of traditional specialists. This offering for SMEs follows on from the huge response we received to our online tax return support tool for individuals.”
TaxTim is a gold member of AlphaCode, a Rand Merchant Investments (RMI) club for fintech startup entrepreneurs.
Dominique Collett, RMI’s senior investment executive and head of AlphaCode comments, “SMEs have traditionally been underserved by financial services firms, so we think this is an exciting development from TaxTim as small business owners really need empowering tools like this to enhance their business productivity. We particularly like how TaxTim approaches a daunting topic like tax by simplifying the process and engaging the user digitally.”
For more information or to complete your company tax return, simply visit and register at www.taxtim.com.
Top Sectors For SMEs In 2019
“As such, SMEs in the construction, communications and electrical fields are all likely to benefit from supply and sub-contracting agreements over the coming years.”
While the South African economy has been underperforming for a number of years, the first positive signs of turnaround started to become visible by the second quarter of 2018, and by the end of the third quarter, data supplied by Statistics South Africa showed that the economy had indeed grown by 2.2 percent, compared to the previous quarter. This uptick is expected to have a positive effect on business confidence in 2019.
This is according to Jeremy Lang, regional general manager at Business Partners Limited (BUSINESS/PARTNERS), who says that certain business sectors have already seen an increase in opportunities for small businesses and start-ups.
“While these sectors will not be without challenges, the following four industries are likely to offer the best opportunities for small and medium enterprise (SME) owners to grow their enterprises in the coming year.”
The World Travel and Tourism report 2018, revealed that the direct contribution of the travel and tourism sector to South Africa’s GDP has been projected to rise from R136bn in 2016 to R197.9bn by 2028 – set to make up a total of 3.3 percent of the country’s total GDP, says Lang.
“Although this sector experienced some setbacks in 2018, such as the drought in the Western Cape and stricter visa regulations for children entering the country, both the water restrictions and visa regulations have been relaxed and the sector is once again poised for growth,” he says.
Statistics South Africa has credited this industry with being the biggest driver of growth in the country’s GDP, having expanded by 7.5 percent in September 2018, says Lang. “To bolster this, Government has made a concerted effort to stimulate small business growth in this area with initiatives such as the Black Industrialist Programme and the SA Automotive Masterplan.”
He adds that businesses in the manufacturing sphere could therefore likely see significant opportunities in the form of outsourcing contracts and new partnerships with large corporates.
“The debate around land expropriation has occupied most of the discussions surrounding the agricultural sector in 2018, with some questioning growth prospects of this sector. However, this industry has a lot of growth ahead of it, as demonstrated by its 6.5 percent growth over the last three months of 2018,” explains Lang.
“Further to this, the industry is also already taking significant advantage of seven climatic regions in South Africa, with the export of a wide variety of high quality fruit and vegetables increasing substantially,” he points out. The recent outbreak of foot and mouth disease that has resulted in the suspension of the country’s FMD-free status will however significantly impact meat exporters.
In terms of opportunities for SMEs, he says that these may most likely be found in the rural and underdeveloped regions, where the need for resources like efficient transport, state-of-the-art cold storage, better irrigation and private power generation will be key to making agriculture projects more productive and competitive in the export market.
Data and information technology
Connectivity and information technology infrastructure are both crucial to business and employment growth in South Africa, says Lang.
“With many municipalities and the Western Cape government committing to providing all of its residents with free data as part of a plan to expand public Wi-Fi network access, it is clear that this is also becoming a high priority on a state level.”
It has also been reported that South Africa is awaiting the arrival of three international data centres, and large players in the communications sphere, including Vodacom, Telkom and Vumatel, are making huge strides in drastically growing the country’s fibre optic backbone, he adds. “As such, SMEs in the construction, communications and electrical fields are all likely to benefit from supply and sub-contracting agreements over the coming years.”
In conclusion, Lang says that as South Africa’s economic growth has started to turn around, business owners should keep their ears to the ground as 2019 is highly likely to be a year of opportunity.
Herman Mashaba To Talk On City Of Jo’burg Job Creation Initiative
Herman Mashaba to talk on City of Jo’burg job creation initiative at 2019 Business Day TV SME Summit.
Leading organisations at the SME Summit
SME Insurance Checklist For New Year
Malesela Maupa, Head of Product and Insurer Relationships at FNB Insurance Brokers, advises SMEs to consider the following factors when reviewing their policies.
Business owners who are planning for the year ahead should not overlook the importance of reviewing their insurance policies to ensure they are adequately covered against insurable risks.
Malesela Maupa, Head of Product and Insurer Relationships at FNB Insurance Brokers says, every year businesses face unique challenges ranging from credit and market risks, technological disruptions, compliance, operational and regulatory risks, amongst others. As a matter of precaution, insurance policies should at least be reviewed or updated once a year.
He advises SMEs to consider the following factors when reviewing their policies:
- Employee movements – if there are any employees who have left or joined the company, ensure that your policy is updated accordingly.
This type of cover normally depends on the role and contribution of the employee to the business. For instance, directors may be covered for Key Person Insurance and Directors & Officers Liability insurance.
- Protest Actions – this year is the national election year and leading up to elections we can expect to see an increase in the frequency and severity of protest actions, riots and strikes. Thus, it is essential to ensure that adequate special risks cover is in place from the South African Special Risks Insurance Association (SASRIA).
SASRIA provides cover to both individuals and businesses against special risks like civil commotion, public disorder, strikes, riots and terrorism at affordable premiums.
- Cyber risks – it is essential to communicate with your insurer or broker and find out if there are any new risks that your business should be protected against. Cyber incidents continue to be a major risk for businesses especially in the SME sector. Over the last couple of years there has been a major increase in the number of reported cyber incidences.
More businesses are now facing increased cyber threats due to their increased dependency on technology, relating to their internal and customer data being compromised by fraudsters. It is therefore essential to have some form of cyber risk insurance cover and/or enhancement of data security protocols.
- Regulatory changes – every year there are a number of regulatory changes that impact businesses directly or indirectly, which may result in fines and penalties for non-compliance.
- Natural catastrophes – the increase in the frequency and severity of extreme weather conditions, coupled with intensifying natural catastrophes will continue to have a significant impact on businesses.
Businesses should ensure they are adequately protected against these risks to avoid incurring sever financial losses.
- Business changes – should a business consider moving to a new location, purchasing new premises or venture into new business activities, these types of changes could have a major impact on its risks profile. As a result, the policy needs to be updated accordingly.
- New and Enhanced products – An innovative culture has taken over the insurance industry and ever so often we see the introduction of new products or the enhancement of existing products. Get in touch with you broker to advise you on any new products that might add value to your existing insurance portfolio.
“Reviewing your policy regularly gives you peace of mind knowing that you can focus on running your business effectively, without worrying about unforeseen risks,” concludes Maupa.
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