Twigg

BUDGET 2012 THE GOOD THE BAD & THE UGLY

2012-02-23T07:37:56Z

The 1966 spagetti western, the third in the Dollars trilogy staring Clint Eastwood,definately won more accolades than this years budget speech....

THE GOOD

Small Businesses gets a great break - tax rates on the 1st R350,000 income are reduced from 10% to 7%. This means that a company earning R350,000 will only pay a net tax of 12% after the new dividends tax (see below)

Personal tax thresholds are adjusted to account for inflation (at almost precisely the January CIPX of 6.3%) while this is no real reduction in tax rates, at least there is no "bracket creep".

Capital Gains exemptions have increased - the primary residence allowance has increased to R2m and the annual exemption has increased to R30,000. The exemption provided for the sale of a small business has also been doubled to R1,8m

]]> THE BAD

Capital Gains Tax inclusion rates have increased to 33,3% for individuals and 66,6% for everyone else. This results in an increase in the maximum effective tax rate on capital gains for indivudals increasing from 10% to 13,3% and from 14% to 18.6% for everyone else.

THE UGLY

STC has been replaced by a dividend tax - the ugly part is that it has been introduced at 15% which is 5% higher than its predecessor. This will come into effect on 1 April 2012. Business owners will need to look carefully at their retained earnings - anything left in the company after this date could cost them an additional 5% to distribute!

Interest Exemptions - SARS has mooted the possibility of limiting the deduction for interest earnings to R30,000 per year with a lifetime limit of R500,000. While it appears that this deduction will be associated with "tax-preferred" savings vehicles. The implementation of life-time limits creates a additional admin burden for anyone attempting to work out your tax liability as the "life-to-date" figures would need to be maintained or obtained.

SALARY OR DIVIDENDS?

2012-02-23T07:22:40Z

“Don't cry because it's over, smile because it happened.”
Dr. Seuss

With the reduction in the Small Business Corporation Tax Rates from 10% to 7% together with the increase in tax of profits distributed as dividends, small business owners need to carefully re-evaluate how they earn their money.

Your choices are:

Take a salary or profit share from the company and pay the tax monthly in the form of PAYE
Take a dividend from the company (after the company has paid the company tax) and pay the 15% withholding tax on the dividend.
A combination of the two above

The answer will depend on a number of factors specific to your circumstances...

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As an example, lets assume that a company earns R350,000 in taxable profit before paying the single member a salary. The member has no other income. Should the member take their rewards in the form of a salary, or a dividend or both?

In this example, if a the reward was taken in the form of a dividend, the income would be subject to tax in the corporation (we have assumed that the corporation qualifies as a small business) of R20,054.02. In addition, when the balance is distributed a dividend witholding tax of R43,036.43 would be withheld (total R63,090) . The net tax rate would therefore be 12,3%

If, the member took a salary of R350,000, this would attract income tax of R70,545 or 20.15%.

If the member received a salary of R57,750, and paid the balance as a dividend, the total tax would be R52,042.63 or 10.29%. This is clearly the best solution for in this case.

Unfortunately, there is no universal answer. Factors such as the shareholder's other income, and the exact amount of profits will need to be taken into account to work out your individual optimum.

The qualitative factors such as the company's need to retain a portion of earnings for future capital projects, cash flow constraints, the future growth and working capital requirements.

For some personal assistance in working out your correct levels, contact Wayne on 033 330 7333.

TAX YEAR END

2012-02-23T06:54:23Z

The tax year end is looming. Later in the year, your tax advisor (hopefully us!) will be requesting information as of 29 February's date. To help you avoid the pain and effort involved in trying to reconstruct this information later, we have prepared a spreadsheet of the information you will need - relax its short and sweet!

The spreadsheet is free, and can be used whether we do you tax or not. It can be downloaded by clicking on this link : http://www.twigg.co.za/Tax Information.xls

When does my 2011 tax return need to be in?

2011-07-09T04:26:07Z

Individuals

If you are submitting your return manually (not recommended) 30 September 2011. Via efiling, you have until 25 November 2011.

if you are a provisional tax payer, and you file electronically, you have until 21 January 2012 to submit your tax return.

Companies

Within 12 months after the financial year end of the company or Close Corporation.

BUDGET 2011 WHAT'S [NOT] IN IT FOR ME

2011-02-24T09:55:19Z

Yesterday saw the presentation by Finance Minister Pravin Gordhan of the annual budget speech.

What does this mean for you and I?

Any budget is about balancing the amount of money that comes in with the amount of money that goes out. Increase what goes out (“creating jobs, reducing poverty, building infrastructure and expanding our economy”) and you must either increase what comes in (taxes) or borrow (deficit).

Minister Gordhan’s challenge was to increase spending (we all want more money spent on education and healthcare) while decreasing our tax burden – oh yes, we are not too keen on the idea of borrowing money either….how has this been achieved?

]]> Individuals make up the largest part of government’s income accounting for approximately 35% of income from taxes, followed by VAT and companies tax. This is the easiest place to make up the revenue. While the Hon Minister grants some relief to individuals from what is known as “bracket creep” this relief actually amounts to an increase in individual’s taxes.

To illustrate this, the table below shows 4 individuals who form part of the 3,5 million people fortunate enough to earn sufficient money to pay tax:

	Individual earnings - no inflation
Taxable Earnings	100 000	200 000	300 000	600 000
2011	7 740	29 940	58 890	169 670
2012	7 245	28 745	56 995	165 495
Nominal Decrease in tax	-6%	-4%	-3%	-2%

This suggests a nominal decrease in the amount of tax that an individual would pay assuming that the amount of money he or she earned was identical in the two years. In reality, the earning power of that person is actually less – enter inflation.

Let us assume each of these 4 individuals receive an inflationary increase in 2012 equal to the CPI (Consumer Price Index) of 3.7% - that in theory should give them the same purchasing power as they previously had. (Is the 3.7% likely to be their personal inflation rate – let’s not go there!)

	Inflation Adjusted Earnings
Taxable Earnings	103 700	207 400	311 100	622 200
2012	7 911	30 595	60 325	174 375
Real Increase in tax	2%	2%	2%	3%

The table above demonstrates that each of the four individuals is actually paying 2% -3% more tax in 2012 than in 2011.

This is not the only place that the fiscus has increased its revenue – the tax on cigarettes and alcohol have once again increased – taxes now make up more than 50% of the price of these items! We are also paying more in electricity and fuel levies.

TAKE YOUR MONEY OFFSHORE LEGALLY

2010-12-03T06:02:27Z

In his Medium term budget speech, Pravin Gordhan announced the relaxation of certain foreign exchange allowances. In particular, the Foreign Capital Allowance and the Single Discretionary Allowance, which have both been significantly increased "to encourage diversification of portfolios and remove unnecessary limitations"

]]> Foreign Capital Allowance
This has been amended to be an ANNUAL R4m allowance per person, effective from 5 November 2010. Note that irrespective of any investment allowances you have claimed before this date, you can claim the full R4m foreign capital allowance for the 2010 tax year.

Single Discretionary Allowance
This annual allowance has been increased from R750,000 to R1m and is valid from 1 January to 31 December in any year. An important point to note with this allowance, is that you do not need to obtain a tax clearance certificate.

You are able to use this allowance for the following purposes:

Donations to missionaries
Monetary gifts and loans
Maintenance transfers
Travel allowance
Study allowance

The entire allowance can be used in any of the above categories. There are however some conditions attached to these.

To allow travellers immediate access to cash on return, the Rand denominated cash allowance has also increased from R5 000 to R10 000 per person when making visits outside the Common Monetary Area (South Africa, Namibia, Lesotho or Swaziland). This is not included in your Single Discretionary Allowance.

(References: Foreign Exchange Control Manual Sections H & O,Investec Private Bank Circular on Investing )

PROVISIONAL TAX - YOU STILL NEED TO COMPLETE THE FORMS!

2010-08-31T09:29:36Z

SARS has widely reported the changes to the provisional tax system in the media. Part of these changes relate to those who do not need to submit an IRP6 (provisional tax return) anymore.

A common misunderstanding is that if you have no tax to pay, ie the net result of your return would be nil, then you don't have to submit a return. This is NOT the case.

]]> SARS in a media release to tax practitioners has made it clear that if you have taxable income, and meet the requirements of being provisional tax payer, even if you have had tax deducted in the form of PAYE, you are still required to submit a provisional tax return.

If you have not submitted a return, we suggest you contact your tax practitioner urgently to do so.

I need my payroll information integrated with my internal systems which are not Pastel based - Can you integrate with my systems?

2010-08-07T04:07:46Z

We can provide you with any payroll information in most formats for importation into your system. All you need to know is what format the information must be in!! Full integration will be difficult.

I need to my payroll reports in very specific formats for reporting purposes, can you do this?

2010-08-07T04:05:46Z

We operate using Pastel Payroll, which in itself offers only limited report customisation, however our Technology division has developed special purpose reports for our clients.

My company operates in multiple centres across the country, can you do this payroll?

2010-08-07T04:01:00Z

Yes, absolutely. Most of our payroll work has been multi location outside of Kwa-Zulu Natal. It merely requires access to a telephone, email, fax machine or a courier service! If you dont have one of these...you need a little more than an outsourced payroll!

I DONT KNOW WHAT I DONT KNOW

2010-08-07T02:59:34Z

The South African Revenue Services has come a long way in recent years. As a young man just entering the working class, I can remember braving the walk down Rissik Street in Johannesburg to stand in long queues in overcrowded rooms with people who clearly did not share my sense of hygiene...

Those days are thankfully gone! You can (and almost have to) now submit your tax return online. Great....or is it?

]]> Instead of the idiocracy of long lines, and moving from ROOM 102 to ROOM 201 to complete your return you now have:

" Error....we could not process your return, please try again later" or

"In order to view this, you need the latest version of Adobe which you can get ....."

Lets not even go to "try phoning the SARS call centre"

Its not all bad, like a Land Rover when it works, it works well!

To help you take advantage of this (and work out what you dont know), we have created a little wizzard. 8 questions and you will know all the infomation you will need to submit your tax return!

Try it - it's both free and anonymous

Let us know what you think

What information do I need to submit my tax return?

2010-08-07T02:40:26Z

Easy answer - everything.

What you need depends on the type of income you have and what deductions from your tax you would like to claim.

We have created a quick wizzard to help you work this out - try it, its free and anonymous!!

How much do you charge?

2010-08-06T03:30:51Z

Annual returns - Companies (includes VAT & CIPC fees)	Price
Turnover less than R1m	627
Turnover between R1m & R10m	1,026
Turnover between R10m & R25m	2,793
Turnover greater than R25m	3,933
A late submission penalty is levied by CIPC depending on your turnover and how late your return is.
We offer a discount on our fees for processing multiple years
Annual returns - Close Corporations (includes VAT & CIPC fees)
Turnover less than R50m	627
Turnover equal to or greater than R50m	5,073
A penalty of R150 is payable for late submissions

Company Secretarial
Registration of a new Company (add R345.50 if you use the Long Memorandum of Incorporation)	880
Amend CC's details (CK2 & Ck2A)	199.50
Name reservations (online)	199.50
Name reservations (manual)	399
Extension of name reservations	175
Changes to register of directors	570
Fulfilling the duties of Accounting Officer (per annum)	5,130

10 STEPS TO HIRING A GREAT BOOKKEEPER

2010-08-05T11:06:41Z

A good Bookkeeper is a valuable resource who will take care of all the financial issues and keep you apprised of the financial health of your business. A bad one can destroy your business. Here’s a practical checklist to guide you through the process:

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Decide what you need - sounds obvious doesn’t it, but many businesses employ staff before giving much thought to what they actually need. Get your current Bookkeeper to draw up a comprehensive list of everything she does on a daily, weekly and monthly basis.
Do you need a senior Bookkeeper capable of taking your books up to balance sheet, or do you need someone with just enough financial knowledge to do a trial balance and hand over everything to an Accountant?
Write a job description – using your current Bookkeeper’s list of responsibilities put together a properly constituted job description for the new person, eliminating non financial tasks that the existing person has inherited or just taken over and that can be given to other members of staff. Check with your Accountant and see if there is anything the new person should be doing that the old one wasn’t.
Develop a profile – you have a comprehensive job description and now you need to add in details such as how many years experience you need the person to have, what level of Bookkeeper you need (your Accountant will be the guide here), what accounting software you use, hours of work and how much you want to pay, benefits and so on. In addition consider if this is a full time job or a part time one.
Short list carefully – whatever way you decide to recruit, via a recruitment consultancy, your own advert or by referral, make sure that you are clear what the minimum criteria are that you are looking for in a new Bookkeeper and anyone that doesn’t meet those criteria doesn’t get interviewed (make sure that the criteria are job specific – “Do you look like Megan Fox?” is not a work related criteria). Always be careful to check that they are happy with the salary on offer, they can commute easily and what notice period they would have to give.
Organise the interviews – having short listed a small number of candidates who meet all the relevant criteria organise to meet them (try and get your Accountant to sit in on the interview or to meet them as well once you have). Make sure that you make time in your diary to do this, don’t just try and fit interviews in around your other responsibilities.
Allow plenty of time for each interview with a 30 minute gap between each appointment so that if you want to talk for longer you can. Try and meet everyone on one day as in that way you can compare everyone at the same time.
Prepare a list of questions – this is very important as you want to compare like with like so you need to ask everyone the same questions. Interviews that meander from one topic to the next mean that you could miss some important points and are more likely to make a decision based on emotion rather than facts. The questions need to cover work related issues (your Accountant should help) and must be specific to the job description that you have written.
If you can (and it is a very powerful way to assess people for this type of position), get your Accountant to put together a short, practical test ideally on the accounting package that your company uses. It doesn’t have to be more than 15-20 minutes and can cover some basic functions that you can get the candidates to do it once they arrive and before they meet you. It provides another objective measure of each candidate’s abilities.

The interview – remember that while you are evaluating each candidate on their ability to do the day-to-day job, you are also assessing how they would fit in with your existing staff. Make sure that your questions also cover their interpersonal skills and how they handle stress, conflict (and customers if their job requires client interaction) and deadlines.

Final checklist – Once you have asked all the questions on your list, you need to check again on salary (get a very clear idea of what the candidate would be happy with), notice period, travelling distance, hours of work and any holidays coming up that you need to know about. Let them then ask any questions on issues you might not have covered (this is also a good way of assessing what is important to the candidate).
Check references - You then need to get the names, job titles and telephone numbers of two referees that you can contact. You need to speak to someone who can confirm what you’ve been told, especially on such areas as scope of work, meeting deadlines, accuracy of work, integrity, interpersonal skills and reasons for leaving their job.
Always make sure that you are talking to a line manager and not a colleague (or relative) and that they are who they say they are (be careful if you are only given a cell phone number). Finally tell the candidates that as this is a finance related job and that they will be handling money you need to do a criminal and credit background check.
The decision – once you have interviewed everyone take some time to go through their answers and their CVs. How did they do on test? Who gave the best answers and who the worst? Who sounded authoritative and who sounded vague? Who did you make a connection with and who not? If one person stands out take their references and do their background checks. The criminal check can sometimes take a few days so if their reference is good and there is no problem with the credit check, you can make an offer subject to the criminal check being clear. If no-one stands out take the references and decide, but if you really don’t think anyone is suitable don’t be afraid to start the process again. Never hire someone if you don’t think they are right for you and your business .

When must I register for income tax?

2010-08-05T10:33:15Z

You must register as a taxpayer if:

You are a salary earner and earn more than R5 000 per month or R60 000 for a full 12 month period;
You receive allowances against which expenditure can be claimed;
PAYE is deducted from your income.
You are a director of a company or a member of Close Corporations (CC).

The following must also register:

Any company (including CCs).
Any person required by SARS.
A sole proprietor (i.e. an individual who is in business in his or her own name), including small businesses.
Trusts and beneficiaries thereof if they received taxable income.
Commission Taxpayer Service Agent/Consultant and contract workers; or
Taxpayers who would like to register voluntarily