The Budget, Provisional Tax & New Medical Aid Provisions – Is it all too much?

It’s the 22^ndof Feb 2012 and the Finance Minister is about to deliver his budget speech later today in South Africa. He’ll be delving into lots of issues surrounding new tax schemes, increases in fuel levies, new medical aid restrictions on employee benefits and lots more.

But how is it actually going to influence you and me? Well, we know that the budget will determine a lot of our personal finances for the next 12 months. How much imported goods will cost – like car prices going up, the big 3D TV etc or even the small things like the price of flour going up as a result in the possible increase of the fuel levy. The more expensive the transport costs, the more the flour will cost; and I’m sure it will be us that will foot this bill.

Importantly though we must not be worried about this news today, but rather embrace it and see how we can benefit from it. That is what your accounting officer should be doing for you. Making sure that with all the expected changes that you, your company and your employees are NOT going to loose out from what’s said in the budget.

Having a good accountant in South Africa is a necessity, not a grudge purchase. It is he or she that can make or break your business and give you the correct business tax advice that you need to grow your business, or increase your profits or just to give some good 3^rd party advice.

 

What to remember for your tax?

Along with this advice, it is now time to remember a few things for your tax.

1. Log books have been a requirement since 1^st March 2010. If you use your car for business or have sales reps out there, they and you need to be keeping an accurate log book. What happens if you don’t have this though? Just send through your closing mileage for 29^th Feb 2012 and you opening mileage on 1^st March 2011 and your professional accountant will try and “re-construct” the log book – with your help of course.
2. All businesses that trade in stock or that need to do a stock take on a regular basis must do an end of year stock take on the 29^th Feb 2012. This will help your accountant figure out how much Rand value stock you had at the beginning of last year and how much you now have at the end of this financial year. This can all help to reduce your tax payment. So don’t delay with it.
3. By the end of February 2012 your professional accountant will also need:
   1. Total amounts of what money is owed to you by customers – known as your Debtors
   2. Total amounts of what money you owe to people – known as your Creditors
   3. Details of any assets that you have bought from 1^st March 2011 to 29^th February 2012
   4. All petty cash details from 1^st March 2011 to 29^th February 2012
   5. If you are using an accounting package then remember to save all of your work and then balance forward.
   6. Make sure all of your salaries and wage records are up to date. Your accountant will need this information. Remember, the more you give the accountant, the less tax you might be paying, so rather spend the extra time and get it all to them.
   7. If you do your own VAT payments, then your accountant will need records of all of these too.
   8. Lastly, don’t forget that provisional tax is due by the 29^th February 2012. If you delay it then you will probably get a penalty, 20% for under paying and 10% for all late payments.

 

If it’s all getting too much then simply contact your professional accountant for help. After all, that is what you pay them for.

If you’re coming around the corner to your next Tax payment, then you’re not alone. Actually, strictly speaking you should have already given your tax specialist all the details they need. Why? So they can try and reduce the payment for you! But how do we get money back from the taxman? Your tax specialist is there to advise you, and one of the ways is by utilising your Fringe Benefits more effectively that you pay to your employees.

So what are these fringe benefits we speak about?

• Does an employee use a company owned vehicle?
• Do you, the employer, make payments to a medical aid on behalf of the employee?
• Do you give holiday accommodation to any employees?
• Do you have long service or bravery rewards for your employees?
• Do you have any interest free or any low interest loans?
• Any subsistence allowances?
• Do you pay for or give housing to any employees?

So a fringe benefit is the cash equivalent of any taxable benefit that you, the employer, may give to an employee.

If all of this confuses you too much and you’re just unsure as to how to proceed then speak to your tax specialist or contact the professionals.

At the end of the financial year it is often the smallest things that we seemingly forget about. One such thing is that our accountants need an acccurate stock take done of our business. But why? The easiest way to explain this is with a simple example. Most businesses carry stock of some sort, whether it is stock in trade or stationary or both. If you buy for example R10 000 worth of stock, but at the end of your financial year, you have say R4000 stock – you have only sold R6000 worth of stock, therefore the effective cost of stock disposed of is only R6000 and not R10 000. Therefore, an accurate stock take that details the name of the stock item, the quantity at hand on the last day of your financial year end – which in many cases is the last day of February – and the cost of the stock, can assist your accountant to ensure that your profits are accurately derived. So without doing an accurate stock take within your business your tax liability may be increased! For further details on how to reduce this tax liability simply see our website or speak to one of our helpful staff at gavin@patc.co.za or by calling 031 702 8112. Alternatively leave us a comment and we’ll reply back to you.

All employees, managers and directors of businesses who receive a travel allowance must keep a detailed log book of all your travels. This has been law in South Africa since 1st March 2010, and the associated name of the law is the Income Tax Act. This log book should detail all trips undertaken by you with your motor vehicle for business and private purposes. An example of the layout of a logbook as well as some great information from the South African Revenue Service about Logbooks can be found on the taxguide page of our website. A Logbook should detail the mileage at the start of your journey, the mileage at the end of your trip, the date of your trip and where you actually went on the trip, as well as whether the trip was for business or private. These recordings can then be tallied up, so as to reflect the total business and private mileage for the period 1.3.2010 to 28.2.2011 and 1.3.2011 to 29.3.2012 respectively. For further details on your travel allowance or your logbook, please visit our website or contact one of our helpful staff at gavin@patc.co.za or by calling 031 702 8112. Alternatively please leave us a comment so we can reply back.

Let’s use an example to explain Provisional Tax further.

When you earn a salary (above the tax threshold), your employer deducts SITE / PAYE from your salary and pays it over to SARS monthly. So if, for example, you earn R10 000 and the tax is say R900, then your employer puts R9100.00 into your bank account and your employer pays this R900 over to SARS.
If you have a second stream of income – either a second job, you receive interest from investments, receive rental income or have your own business for instance. Then this additional income must be taxed too. But as the payer of this income – the bank or your tenant – is not an employer – no tax is deducted from the source. You being a provisional taxpayer – as you earn a second income or have your own business – you are personally responsible to make sure that the respective tax is paid over to SARS. This would be in addition to your tax on your salary.
So for example – you receive rental income from a property you rent out and the net amount is say R5000 pm, the R10 000 salary plus the R5000 rental income must be added together and you must effectively be taxed on R15000. So if the Tax on R15000 is say R1700, but you already pay R900 via your salary, the remaining R800 must be paid over to SARS by you yourself.
But, instead of paying it over monthly, you have to keep it aside and pay it over every six months. So you’ll pay it over on the last working day of August each year (for the prior six months) and again on the last day of February (for the six month prior to that).
This is purely for the payments to SARS.
You are in addition to the above, registered as a tax payer. So even though you might have met your financial obligation, by doing what I’ve mentioned above, you STILL need to do a tax return annually whereby you declare all your taxable income and tax deductible expenses for a full year 1 March to last day of February each year.
And that’s Provisional Tax in a nutshell.
Contact us now for more information on provisional tax or any other tax related queries that you may have.

Business tax services offer the most effective way to register as a Small Business Corporation. From a tax point of view some of the benefits you can receive include the following:

1. For the year ending 31 March 2011:
a. Taxable Income less than R57 000 attracts NIL tax
b. Taxable Income greater than R57 001 up to R300 000 attracts 10% tax
c. Taxable Income greater than R300 001 attracts 28% tax (+R2 4300)

2. For the year ending 31 March 2012:
a. Taxable Income less than R59 750 attracts NIL tax
b. Taxable Income greater than R59 751 up to R300 000 attracts 10% tax
c. Taxable Income greater than R300 001 attracts 28% tax (+R24 025)

3. Investment Incentive:
a. The full cost of any asset used in a process of manufacture and brought into use for the first time on or after 1 April 2001, may be deducted in the tax year in which the asset is brought into use. As from 1 April 2005, all other depreciable assets are written off on a 50:30:20 bases.

To register as a Small Business Corporation, contact us today for further business tax services advice relating to small business taxes.

So, what do you need to know then to see if you qualify as a small business corporation? Well, to start with you need to have a good accountant or a business tax services consultant that can help you with the registration process.
A business tax services consultant will be able to register on your behalf, and assist with all requirements that may be needed.
If you meet the below requirements then you qualify, as simple as that:
1. All shareholders or members are natural persons.
2. All shareholders hold no shares in any other private company.
3. All members hold no members’ interest in any other Close Corporation.
4. Gross income for the year of assessment does not exceed R14 million.
5. Not more than 20% of the gross income and all the capital gains consist collectively of investment income and income rendering a personal service.
a. Investment Income includes any annuity, rental income, royalty or any income from investment or trading in financial instruments, marketable securities or immovable property.
b. Personal Service includes any service in the field of accounting, actuarial science, architecture, auctioneering, auditing, broadcasting, consulting, draughtsmanship, education, engineering, financial service broking, health, information technology, journalism, law, management, real estate broking, research, sport, surveying, translation, valuation or veterinary science, which is performed personally by any person who holds an interest in the company or Close Corporation, except where such small business corporation employs three or more unconnected full-time employees for core operations.
So the question is simple, do you qualify? If yes then contact one of our business tax services consultants today so that we can start helping you.

How do you make the most out of your travel claims? One of the business tax services that PATC offers is help with travel claims. The South African Revenue Service is annually trying to close the door on travel allowances and the amount that you, the tax payer, may be able to deduct for your travel claims. But if you are careful there are still many ways to benefit from this allowance.
Some of these tips include:
1. Having an up to date log book.
2. Knowing how many kilometres SARS allow as personal use and business use.
3. Who can benefit from a travel allowance
4. How can you benefit from using a company car
Don’t let your travel claims and your travel allowance by a hindrance to you, speak to a professional in business tax services now to see how you can start saving thousands of Rands in 2012 and beyond.