Blog | Business Advice
Master finance in business with these top tax tips
By Johann S|
February 13, 2023
The conclusion of the 2023 tax year is fast approaching and tax season is upon us. With this in mind, we’re sharing a helpful guide on how to navigate tax like a pro. This is by no means an exhaustive guide to tax – you’re better off engaging the services of an accountant or a tax practitioner for those purposes. This is a simplified overview of tax tips to help you avoid administrative penalties and make the most of available tax breaks.
Tip 1: Avoid admin penalties for outstanding tax returns
Have you submitted your tax return before the deadline? Under the Tax Administration Act, SARS can issue administrative penalties for outstanding tax returns. Previously, SARS could only levy administrative penalties if a taxpayer had two or more outstanding tax returns between 2007 and 2020. As of December 2021, SARS can levy administrative penalties if there is even one outstanding tax return from 2021 onwards.
These penalties are pretty rough, and they stack up quickly. Administrative penalties can be charged on a monthly basis for a maximum of 35 months – 47 months if the taxpayer’s address is unknown. The penalties are fixed, and they’re calculated as such:
|Assessed loss or taxable income for the preceding year||Penalty|
|R250 001 – R500 000||R500|
|R500 001 – R1 000 000||R1000|
|R1 000 001 – R5 000 000||R2000|
|R5 000 001 – R10 000 000||R4000|
|R10 000 001 – R50 000 000||R8000|
|R50 000 000+||R16 000|
So, let’s say that you brought in a total taxable income of R1.5 million for the preceding year of assessment and you’ve got two outstanding tax returns. SARS will levy a penalty of R2000 for each outstanding return every month. That’s R4000 a month – every. Single. Month. Quite quickly, these fines can snowball into a financial burden.
Obviously, the best thing to do to avoid incurring an administrative penalty from SARS is to submit your tax return well before the deadline. But we also know that life happens and things don’t always unfold before the deadline arrives. Here’s what to do next: first, get your ducks in a row to ensure that the company is fully compliant. Then, apply for a facility with Bridgement to help you cover any unexpected tax expenses and get back into SARS’s good graces.
Tip 2: Become a voluntary VAT vendor
If the total value of the business’s taxable goods or services is more than R1 million in a period of 12 months – or if it is expected to exceed this amount – then it is compulsory to register for VAT. But becoming a voluntary VAT vendor (which you can do if the income earned in the past 12 months exceeds R50 000) is not without its benefits.
For instance, if your business is not registered for VAT and you buy from a registered supplier, you won’t be able to claim the VAT back from the supplier’s invoice until you are a vendor yourself.
In any case, the best tip we can provide when it comes to staying on top of VAT is to keep VAT collections in a separate account. This will make it less tempting to use VAT funds to cover other expenses and ensures that the business is compliant when SARS comes calling.
Tip 3: Explore employment tax incentives (ETI)
Adjusted employment tax incentives were introduced in March of last year to encourage the employment of young job seekers who are currently being excluded from participation in the economy. ETIs represent an excellent opportunity for businesses to upskill young people and equip them to drive the economy forward, all while enjoying a tax break.
ETI reduces the cost of hiring through a cost-sharing mechanism entered into with the government. It works by reducing the amount of PAYE (Pay As You Earn) you pay without affecting employee salaries. Employers can claim the incentive for qualifying employees for up to 24 months.
What qualifies an employee for ETI?
- They must be employed full time
- They must earn a salary of between R2000 and R6500 per month
- They must be between the ages of 18 and 29, or be employed in a special economic zone
- They must be in possession of a South African ID, Asylum Seeker permit, or an ID issued in terms of the Refugee Act
The value of the ETI depends on the remuneration of the qualifying employee. This is calculated according to this table:
|Monthly Remuneration||Formula for first 12 months||Formula for second 12 months|
|R0 to R1 999,99||75% of monthly remuneration||37,5% of monthly remuneration|
|R2 000 to R4 499,99||R1 500||R750|
|R4 500 to R6 499,99||R1 500 – [75% x (monthly remuneration – R4500)]||R750 – [37.5% x (monthly remuneration – R4 500)]|
The bottom line: Stay compliant and get help in the right places
Tax can be tricky, but there’s no need to fall prey to panic. The key thing is for the business to remain compliant – that’s the most important thing. If you’ve overstepped some deadlines or miscalculated several tax-related expenses, don’t fear being caught short. Simply talk to Bridgement about fast and simple business funding. No red tape, no application fees. Just business funding in 24 hours or less, simple as that.
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