Page 9 - Business Sense-11.3 Rajesh Lutchman eBook

TAX BENEFITS CAN POWER YOUR BUSINESS GROWTH

Heather Flack, Business interest etc. It’s a simplified Section 12C and 12E: Very
Leader, Flair Accounting system that reduces both Useful Deductions
your admin and your stress- We all know that we can write off
et’s face it, induced wine consumption. the cost of (depreciate) our capital
when most This structure is great for purchases over a set amount of
Lof us hear very small businesses with time, prescribed by SARS.
the word SARS, very few overheads. Just make
our fight- sure you’re not also registered ■ Section 12C is ideal for any
or-flight for VAT – SARS doesn’t like type of manufacturing
instinct double dipping. Run the business – The act lets you
kicks in. numbers and see if it wouldn’t claim accelerated depreciation
We picture maybe suit you better to be in on certain capital assets –
forms, this tax system. particularly machinery and
audits, and those polite-but- equipment used in
terrifying “letters of demand”. Small Business Corporation manufacturing or production
(SBC) Tax Rates: The VIP Lane (40% year 1, 20% per year
Do you know that South for Small Business thereafter).
Africa has one of the most
progressive tax systems in This is one of the best things ■ Section 12E is the turbo
the world? So before you run SARS ever did for small boost for Small Business
for the hills let me surprise businesses in South Africa, Corporations (SBC). The Act VAT Registration Threshold: and SARS doesn’t always make
and delight you: SARS (South and a phenomenal incentive allows qualifying SBCs Perception is Truth it easier—but sometimes, it
African Revenue Services) for entrepreneurs to employ to also claim accelerated does actually help. You just
actually offers some amazing people. If your turnover is depreciation on assets — If your turnover is below need to know where to look.
tax benefits for small below R20 million a year, you including office equipment, R1 million, you’re not required
businesses and entrepreneurs. only own one business, and furniture, delivery vehicles, to register for VAT – but you Or better yet, partner with
Benefits you can use to power employ three non-related staff and machinery (100% in year 1). can choose to. And sometimes, someone who speaks fluent
your business by reducing your members, you will qualify Employment Tax Incentive it’s a smart move – especially if Taxanese. Numbers don’t lie,
tax liability and keeping more for SBC tax rates. This means (ETI): SARS Wants You to Hire your clients are VAT-registered but they also don’t speak unless
cash in the business. lower tax brackets on your People businesses who don’t mind a you know what to look for, and
first R550,000 of profit. little input VAT in their life. The you ask the right questions. 
Turnover Tax: Because Simple Normal companies will pay This one’s is an absolute gem reasons businesses like working
can be Sexy company income tax per year and my personal favourite. Hire
of R148,500 on their first young South Africans (aged with VAT registered entities is T: +27 (0)31 207 1572
For businesses with a turnover R550,000 profit (that’s a rate 18–29) and you can claim up to because there is an unspoken E: heather@flairaccounting.co.za
under R1 million, SARS offers of 27%), whereas businesses R1,000 per employee per month knowing that your business is W: www.flairaccounting.co.za
a system called Turnover Tax. who qualify for SBC will only off your PAYE bill. It’s like SARS more compliant than others.
This is perfect for the kind pay R57,698 (that’s a massively is helping you to build your team. Being VAT registered you need to
of entrepreneur who panics reduced rate of only 10.49%) There’s paperwork (of course), submit returns to SARS every two
when they hear the word company tax on their first but if there was ever a reason to months. Which means you more
administration.
R550,000 profit. That is a employ our young people – this than likely have an accountant
If you apply Turnover Tax, significant saving of R90,802 is it. You are already doing the and are a good standing
you get to pay tax based on per year, which you then get right thing by backing our young trustworthy member of society.
your sales, not your income to reinvest back into your talent, so it’s a double win to be
after expenses, depreciation, business for growth. rewarded for it too. Running a business is hard

THE HIDDEN BURDEN OF TRUSTEESHIP

n boardrooms and business Trusteeship Is a Legal Role – The Enforcement Tide Is low-income beneficiaries, lower from the outset. A poorly
circles, being asked to Not a Favor Turning the overall tax bill – simple. constructed trust deed is not
Iact as a trustee can feel At its core, a trust is a contract. Until recently, the system was Not quite. just a nuisance – it can render
like a mark of respect – a The trust deed sets out the rules, the entire structure ineffective,
role offered out of trust and the powers, and the obligations lenient. Many trusts went years Tax law, particularly Section or worse, non-compliant.
prestige. But make no mistake: that trustees must follow. Yet – even decades – without proper 7, enables authorities to “look
trusteeship is no honorary title. administration, and nothing through” the trust and attribute Trusts remain useful tools in
It is a legal obligation with many trustees, particularly happened. But regulators income back to the person who wealth planning and corporate
serious responsibilities and, those appointed out of goodwill, are increasingly enforcing originally contributed the assets structuring. But the casual
never read the document. Fewer
increasingly, real risks. compliance, and when the – especially if distributions are approach to trusteeship belongs
still understand that if the deed knock comes, it is the trustee made to minor children. While in the past. It’s time business
For decades, trusts have been is drafted poorly or inflexibly, who answers the door. some tax efficiencies are still
used to hold family assets, they could be stuck – unable to possible, each case must be leaders treated the role with the
protect wealth, and manage act without costly amendments One of the most assessed carefully. A misstep seriousness – and caution – it
intergenerational planning. or court approval. misunderstood requirements can cost far more than the tax demands.
Often informal in practice, these is the need for formal trustee saved. And If your trust no longer
vehicles were treated as little The fiduciary duty of a trustee meetings. At least once a year, serves its purpose and you
more than passive asset holders. is among the highest in law. trustees must gather to review The Business Takeaway are concerned about your
Trustees – typically family Trustees must act in the best the trust’s affairs, approve obligations as a trustee it may be
friends, business associates, interest of all beneficiaries, financial statements, and If someone asks you to
or advisors – were appointed impartially and diligently. They decide on distributions – all become a trustee, think twice. time to consider closing it. 
with little thought and even less must maintain records, oversee before year-end. Backdating Better yet, say no – unless
guidance. That era is ending. financial statements, manage distributions or acting months you fully understand the For more information contact:
bank accounts, and ensure the commitment and are adequately
The law is catching up trust is tax compliant. In most after the fact is not just bad compensated. This is not Alan Hockey: +27 (0)71 673 9937 or
with casual trusteeship. Tax cases, the trustee serves as the practice; it’s unlawful. volunteer work. It’s a serious Brian Payne: +27 (0)83 309 1982
authorities are taking a closer trust’s public officer – meaning Tax Optimisation? Not legal role with rising compliance W: www.lemsystems.co.za
look. Compliance obligations if tax filings are missed or errors burdens, personal liability, and
are tightening. And those who are made, they are on the hook. Without Risk reputational risk.
have accepted the role without There’s a common perception
understanding it are facing And no, ignorance is not a that trusts offer easy tax And if you are setting up a
exposure. defence. benefits. Distribute income to trust, take professional advice

9