Reaping the Benefits of Good Tax Planning

With a recession gripping South Africa, money is tight and businesses are looking for ways to manage their cash flows. The natural reaction is to hunker down and try to forget about tax. But the far better option is to stay calm, plan well and rely on Moore Stephens to advise you on your tax affairs. In this way, we will be able to help you achieve the best possible outcome.
 
The good news from the recently released Medium Term Budget Policy Statement is that no additional tax increases were proposed for corporate or personal income tax. But there is significantly less money in SARS’ coffers, partly because it had to pay out a backlog in VAT refunds of R20 billion. With pressure to save every rand it can, SARS will be clamping down on non-compliance and tax evasion. You will clearly need to pay your taxes, such as Value-Added-Tax (VAT) and Pay-As-You-Earn (PAYE), but we want to help you maximize the advantages and allowances you are entitled to.
 
We suggest you interact with a Moore Stephen's partner or tax advisor in your area and discuss what your company is expected to be exposed to over the next 18 months. Based on this, we’ll be able to give you an indication of what your cash flow is likely to be from a tax perspective and how to anticipate the road ahead. In these tough times, your profit may not be where it has been in the past, so we also want to ensure we estimate your income with certainty.
 
These are some of the aspects with which we can help you.
 
Employment Tax Initiative
 
The National Treasury has given the go-ahead for the Employment Tax Initiative (ETI) to be extended to February 2029. The ETI was introduced to encourage companies to draw more young people into employment. Companies are entitled to PAYE tax reductions if they hire young people between the ages of 19 and 29 who earn up to a maximum of R6,000 per month.
 
Accelerated Wear and Tear Allowances
 
You are entitled to an accelerated write-off on your cost on capital items, ranging from everything from air conditioners to workshop equipment. Speak to your tax advisor, so that he/she can structure it properly for you to qualify.
 
Exemptions on Donations Tax
 
Giving can leave you feeling really good and will help others in these tough times as well. Donations to charitable, ecclesiastical and educational institutions, as well as certain public bodies in South Africa, are exempt from tax. Donations of up to ten percent of your taxable net income can be claimed as a deduction for tax purposes, as long as the organisation is able to provide you with a Section 18A certificate.
 
Building Allowances
 
The government has recognized that investments in buildings and property produce housing, create jobs and help to grow the economy. You may be able to access tax relief from buildings that you buy, build or extend in urban development zones. We will be able to work out how to achieve the best tax breaks for you.
 
Retirement Annuity Contributions
 
You can reduce your tax liability by contributing to a retirement annuity (RA). It’s the government’s way of encouraging people to save. This should also benefit your employees if they have a provident fund. Your RA is tax-deductible up to 27.5 percent of your taxable income or remuneration, up to an annual limit of R350,000. It’s also exempt from tax on dividends and interest and you won’t have to pay capital gains tax on the growth earned on your investment.

The Benefits of a Tax Advisor
 
As long as you’re within the constraints of the law, we are on your side. We will be able to help you ensure your records are up to date and that you are claiming everything you should be claiming. If your business is under stress and you need to look at re-financing, it’s also best to contact your tax advisor first, so that you can get a better tax advantage.
 
We realise that good tax planning takes time and work, and you will need to plan and budget for it, but as a client, you will reap the benefits. The savings you achieve through professional tax planning will significantly outweigh any fee you pay. It will also go far in giving you peace of mind as you move towards the provisional taxpayer e-Filing deadline of 31 January 2019.  
 
Janine Bamber is a director in the Moore Stephens Durban office. Contact Janine here