Going Beyond Accounting Taking Your Business Forward Monique
Going Beyond Accounting, Taking Your Business Forward Monique Sharland CEO Business Accounting Network
Introduction and Welcome Presenter: Monique Sharland CEO and founder Business Accounting Network Professional Accountant, SME Tax Law specialist and Franchising expert Professional body: SAIT
Disclaimer: THE INFORMATION IN THIS WEBINAR IS FOR GENERAL PURPOSES ONLY AND IS NOT A SUBSTITUTE FOR PROFESSIONAL ADVICE. WE TAKE NO RESPONSIBILITY FOR ANY ACTIONS TAKEN OR NOT TAKEN ON THE BASIS OF THE INFORMATION IN THIS WEBINAR. Tax Tip #1: Only obtain tax advice from a reputable and knowledgeable registered Tax Practitioner. Never listen to “free advice”, especially from unqualified friends and family – it’s all hearsay and can get you into serious financial distress!
A Webinar for Small Business Who Want to be More Tax Efficient Type of Tax Income Tax Value Added Tax (VAT) • Corporate Tax ü Transfer Duty • Pay as You Earn/Provisional Tax ü Customs & Excise Duty ü Estate Duty • Fringe Benefits tax • Capital Gains Tax • Dividend Withholding Tax • Donations Tax Skills Development Levies & UIF ü Securities Transfer Tax ü Ad Valorem Excise Duties Sugar Tax Municipal rates ü
A Webinar for Small Business Who Want to be More Tax Efficient • Common tax mistakes that small and medium businesses make, and how to avoid them; • Ignorance of the law is not an excuse – tax and VAT stuff to watch out for! • What SARS knows about you, that you need to know! • How to pay less tax… made simple;
Common Mistakes Businesses Make and How to Avoid Them! Income Tax: • Beware of deducting “home office” expenses on owned “primary residence”: Don’t risk losing primary residence exemption up to R 2 million on Capital Gains
Common Mistakes Businesses Make and How to Avoid Them! Income Tax – What to Watch Out For! Company payments to shareholders/directors or members: What happens when a director does not have monies owed to it by the company (loan account) and draws out more money from the company than his/her net salary amount? = “Deemed dividend” and dividend tax (20%) = contingent liability of the company!
EXAMPLE: “Deemed dividend” and dividend tax contingent liability! Assets Property Plant and Equipment Shareholders loan account Current Assets Balance Sheet R 500 000 R 750 000 R 1 400 000 Liabilities Retained Income Long term loans Current liabilities R 940 000 R 350 000 R 110 000 R 1 400 000
Tax and Vat Stuff to Watch Out For! (Ignorance of the law is no excuse) Employees tax (PAYE): • Taxation on Fringe Benefits
Tax and Vat Stuff to Watch Out For! (Ignorance of the law is no excuse) VAT law: “Clawback” VAT output payable on Fringe Benefits: “Determined value” of motor vehicle (excluding VAT) x 03% or 06% x 15/115 = monthly output VAT “other”.
Tax and Vat Stuff to Watch Out For! Example: VAT output payable on Fringe Benefits: Vehicle Cost VAT inclusive: R 575 000 “Determined Value”: R 500 000 Monthly VAT output to declare and pay: 0. 3% = R 195. 65 (motor vehicle as defined) 0. 6% = R 391. 30 (delivery vehicle or motor cycle)
Watch Out! Know the Law! Taxpayers are held personally liable! Criminal offences: v Fails or neglects to register with SARS under a tax act v Fails or neglects to notify SARS of a change in registered particulars v Fails or neglects to retain records as required by any tax law v Issues erroneous, incomplete or false returns v Refuses or neglects to reply to or answer any questions put by a SARS official v Fails or neglects to disclose to SARS any material facts under the tax act v Fails or neglects to notify SARS of anything which is required to be notified to SARS under the tax act
What SARS Knows About Your Business That You Need To Know! IT 14 SD = Supplementary Disclosure to a company tax return 1. 2. 3. Turnover per VAT 201 returns and the IT 14 tax return VAT input claims per VAT 201 returns and the IT 14 return Salaries and wages claimed on the IT 14 tax return compared to the IRP 5/IT 3(a) certificates 4. Income tax per balance sheet line item on IT 14 reconciled to tax payable to/due by SARS Registerable assets, e. g. motor vehicles, caravans, motor bikes, properties.
Watch Out! Know the Law! SARS will raise an assessment on a an estimate (based on information readily available to it) if the taxpayer fails to submit a return as required! (Reference: Tax Administration Act) Tip: Keep your returns up to date! Otherwise …………. . [see next slide]
Watch Out! Know the Law! SARS can dip into your bank account to help itself to outstanding tax debt! Tip: Keep your contact details up to date with SARS! (and now ………… for some good tax tips and news!)
Tips! Apply for a tax clearance certificates every year! Good Financial Management tips: • Open a call or money market account to save VAT monthly! • Open a call or money market account to save TAX monthly!
Some Good News Amongst the Gloom Tax Saving Tips
How to Pay Less Tax – Made Simple Get your business structure right! If your business qualifies as a Small Business Corporation (SBC) … Your business can save up to R 95 070 in Tax per annum!
How to Pay Less Tax – Made Simple How can you qualify as a “small business corporation” for tax purposes? v Gross income (turnover) must not exceed R 20 million per annum v Applies only to companies and close corporations v All shareholders must be natural persons v The shareholders or members may not hold shares or members interest in any private or unlisted companies apart from certain exceptions v Not more than 20% of total receipts may consist collectively of investment income and the income from rendering of personal services. v The SBC may not be a “personal service provider”
How to Pay Less Tax – Made Simple Have your business pay interest on your credit loan account v Save 28% tax on the interest paid in the company v Get R 23 800 interest exemption in your personal hands …. . that is tax free!
How to Pay Less Tax – Made Simple Claim notional VAT input on change in use of assets and on the purchase of second-hand goods v That’s cash in your bank for nothing!
How to Pay Less Tax – Made Simple Turnover Tax (Micro Businesses): Does your business qualify? v Individuals and companies v All natural persons own the business (companies) v Gross income under R 1 million p. a. v Providers of professional services, personal service companies and labour brokers cannot elect to register. v Apply for registration prior to beginning of financial year v Less than 10% of total receipts or accruals consist of investment income v Disqualified if shares or interest held in the equity of other private companies or close corporations
How to Pay Less Tax – Made Simple Tax Calculation on Turnover versus Profit Comparison: Micro Entity Turnover Tax based on: Tax Payable: Conclusion: TURNOVER R 900 000 R 11 150 Company Tax 28% Company SBC Tax Company Tax PROFIT R 39 821 R 11 150 R 238 350 R 11 150 Sole Proprietors Individual Tax PROFIT R 140 944 R 11 150 To analyse whether registering a micro business for turnover tax or not is based: 1. entirely dependent on the consistent annual taxable profit of the entity, and 2. on the nature of the turnover, if the entity is a company, e. g. consulting business versus a retail outlet and whether the entity will qualify for SBC tax.
How to Pay Less Tax – Made Simple Tax on Company Car versus Travel Allowance Comparison: Vehicle “determined value” Annual taxable remuneration Value of fringe benefit and travel allowance Business km Private/personal km Total km Additional tax (fringe benefit and allowance) Actual Tax on private/personal use R 200 000 R 540 000 R 84 000 12 000 2 400 14 400 80% R 25 749 Fringe benefit 20% R 6 078 Allowance R 5 037 R 5 816
How to Pay Less Tax – Made Simple Tax on Company Car versus Travel Allowance Comparison: Vehicle “determined value” R 500 000 Value of fringe benefit and travel allowance R 210 000 Additional tax (fringe benefit and allowance) 80% R 65 087 Fringe benefit 20% R 15 932 Allowance R 13 186 R 10 287 Actual Tax on private/personal use The higher the cost of the vehicle the higher the tax on the fringe benefit compared to a travel allowance. The lower the cost of the vehicle the lower the tax on the fringe benefit but the higher the tax (only marginally) on the travel allowance
How to Pay Less Tax – Made Simple Deciding Factor is NOT tax – but cash outflow! R 200 000 vehicle Fringe benefit Allowance R 5 037 R 5 816 Motor Vehicle repayments 0 R 55 284 Fuel 0 R 12 000 Insurance Maintenance 0 0 R 7 200 R 14 000 R 5037 R 94 300 R 63 708 R 94 300 R 78 184 allowance after tax Tax on personal km Total (if an employee) Total (if owner managed company) after 28% tax deduction
How to Pay Less Tax – Made Simple Tax free travel reimbursement (2020) = R 3. 61 per km unlimited km’s Compare travel allowance tax free portion to maximum tax free travel reimbursement: R 3. 61 x 12 000 = R 43 320 annual tax free travel
How to Pay Less Tax – Made Simple Tax free travel reimbursement Vehicle R 200 000 Value of travel allowance and fringe benefit R 84 000 Cash value of travel allowance after tax before expenses R 78 184 Cash value of travel reimbursement (tax free) R 43 320
How to Pay Less Tax – Made Simple Buying a vehicle in the company wins all round!
How to Pay Less Tax – Made Simple Paying a dividend versus paying a bonus Comparison: Shareholder/Member’s remuneration Company makes a taxable profit R 720 000 R 300 000 Tax on remuneration Tax on company profit (28%) Dividend R 198 021 R 84 000 Dividend Withholding Tax: R 60 000 R 321 021 R 0 R 342 021 R 321 021 SBC Tax on profit: R 15 470 R 0 Total tax payable by a SBC: R 273 491 R 321 021 Total taxes paid by an owner managed company: Bonus Small Business Corporation:
How to Pay Less Tax – Made Simple Bonus tax saving tip! Save anything up to R 143 500 tax per year by investing 27. 5% of taxable income in a retirement fund up to a maximum of R 350 000 = taxable income maximum R 1 272 700
How to Pay Less Tax – Made Simple And one last important thing! Don’t use “tax practitioners” who break the law …………. . it is a criminal offence for any tax practitioner who neglects or fails to register as a tax practitioner with a Controlling Body and with SARS (up to 2 years imprisonment or a fine).
Join us for the next of our Business Webinar series: LABOUR RELATIONS 101: Getting the Basics Right Presenter: Justine Del Monte A webinar made simple for the SME business sector 31 st October 2019 09 h 00 – 10 h 00
Questions?
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