May 14, 2021
South Africans are very creative when it comes to finding loopholes that enable them to pay less tax.
Is it because our taxes are so high? The answer is ‘possibly’.
South Africa’s tax structure taxes the individual which is problematic. Most of the country is unemployed and retrenchments have been on the up since the COVID-19 pandemic hit the country. In fact there are only 3 million taxpayers in South Africa. For this reason, there is an undeniable burden on individual tax payers to carry the required tax income for the country. Because of this burden, tax payers will do what they can to avoid paying additional tax.
But whatever the reason, SARS has worked hard to close those loopholes which has in turn, made our tax laws extremely complicated.
For the average business owner or individual this is a challenge.
Unless you are a tax specialist and up to date with the latest changes that SARS has put in place, as well as au fait with laws as they already are, you could end up paying more tax than you should. You could also be inadvertently guilty of not paying enough tax, or the tax that you should lawfully be paying.
Additionally, SARS recently entered South Africa into the Common Reporting Standard. This means that they now have access to all bank accounts world-wide. So SARS can easily see whether your tax return information is accurate against your financial records.
While SARS more recently introduced their automated system in an effort to assist businesses and individuals to comply with the current tax laws and pay the right amount of tax, this is not the answer. Sure this system may seem to be easy and helpful, but paradoxically, the tax calculations that SARS automates for you, are not always accurate.
So it is already clear that due to the complexity of our tax laws, as well as the fact that SARS has access to all your financial records, that you can get into a sticky spot if you don’t know what you are doing when it comes to tax submissions. Plus we have the fact that SARS own calculations are not always accurate.
Tax doesn’t have to be taxing
The answer really is to employ a professional tax consultant to manage your tax affairs for you. This way you will invariably end up paying less tax, while ensuring that you are fully compliant with all the laws that SARS has in place. Why worry about the complexity of tax when you don’t have to?
SARS automated system, though slightly flawed, may also save you time if this is a concern for you. When you lean on a tax consultant, you save time and stress too.
At MSO Accounting Group we assist individuals and businesses manage their tax in an affordable manner. We make sure that you pay as little tax as you are legally allowed to and ensure on your behalf, that your tax submissions are accurate and on time.
Get in touch with us on 082 430 6016 or email office@msoaccounting.co.za to get your uncomplicated, legal and affordable tax journey started.
May 13, 2021
Many small business owners have their hands full with tax-related paperwork. If you’re one of them, the admin probably ranks low on the list of your favourite things to do, says Yolandi Esterhuizen, registered tax practitioner and director at Sage Africa & Middle East. However, filing accurate tax returns and meeting SARS deadlines is one of the most important responsibilities you face.
The interest and penalties payable on late or inaccurate VAT, PAYE or company income tax returns can be harsh. That means it is in every small business’s interests to prepare the relevant submissions on time and to ensure they are accurate.
Here are three ways to get it right:
Consult the professionals
Unless you’re an accountant, it’s wise to seek help from a professional to understand your tax obligations. You, or your accountant, will use the annual ITR14 declaration on the SARS eFiling system to set out your income and expenses. Your declared profit or loss for the year will determine how much tax you will need to pay, or if you will get a refund from SARS.
Some limited liability companies are required to be audited.
If you run a sole proprietor or partnership business, it will not be registered with the CIPC. You will submit a form called the ITR12 each year, and provisional tax submissions twice per year. You can do this yourself without needing to appoint an accountant.
However, a registered tax practitioner can help ensure you comply with SARS regulations and offer advice about how to reduce your tax bill by making full use of the tax deductions to which you’re entitled.
Look for a firm or professional registered with a professional body such as the South African Institute of Professional Accountants (SAIPA) or the South African Institute of Tax Practitioners (SAIT). Your tax practitioner should also be registered with SARS. Look for someone with good references who has an established base of small business customers.
Automate processes and keep electronic records
Many small business owners still use Excel spreadsheets and a shoebox full of bank statements, bills and receipts to track their assets, liabilities, inventory, expenses and payments. This approach is time-consuming and prone to error, and it also means you may end up paying an accountant more to capture and reconcile your transactions in a proper accounting system.
You can save time and frustration for yourself and your accountant by capturing every transaction in an electronic accounting system as it takes place.
A good accounting system will make it easy for you to send invoices, track outstanding payments, and monitor expenses, and today’s cloud-based solutions are easy to use and priced on an affordable subscription. An accounting and payroll solution developed for the local market will automate your payroll tax (EMP501 and EMP201) and VAT201 returns for easy submission.
Know the deadlines
You need to meet some important deadlines each financial and tax year.
Registered companies
- You must file a compulsory provisional tax return six months from the start of the financial year and another at the end of the financial year.
- You may make a voluntary submission and top-up payment six months after year-end.
- You must file your annual return within one year of the end of your financial year.
Provisional taxpayers (e.g. sole proprietors)
- You must file one provisional return and make one tax payment by end-August.
- A second provisional payment is due by the end of February (end of tax season).
- You may make an optional third payment within six months of the year of assessment if the amount paid in previous payments was insufficient.
- Tax filing season for provisional taxpayers usually begins in early June with a deadline of 31 January.
PAYE
- Submit the monthly EMP201 by the seventh of the following month or the Friday before if the seventh falls on a weekend or public holiday.
- File the interim EMP501 reconciliations (1 March to 31 August) between 1 September and 31 October.
- File the annual EMP501 reconciliations (1 March to 28/29 February) between 1 April and 31 May.
VAT
- Manual submissions of the VAT201 payment must be complete by the 25th of the month (or the Friday if the 25th falls on a weekend or public holiday).
- Electronic submissions and payment (via either SARS eFiling or Electronic Funds Transfers) of the VAT201 must be done by the last business day of the month.
This article is provided with thanks to Business Tech. The original article can be found here.
May 4, 2021
Entrepreneurs need to draw on a wide variety of skills to succeed. In the course of a single day, you may wear 10 or more different proverbial “hats.” In other words, you may take on 10 or more different responsibilities throughout the day. On top of that, you’ll be in charge of making decisions that impact the entire organization, which means you’ll need to think about how your decisions impact each department and individual in the company.
In most circles, you’ll hear plenty of people recommending generic skills like “communication” and “leadership,” which are certainly important. But other technical skills often get neglected. For example, it’s important that every entrepreneur have at least some exposure to the accounting world.
Why are accounting skills so important for entrepreneurs, and how can you get them?
Developing accounting skills
Fortunately, developing your accounting skills doesn’t take much time or effort. If you want to go all-out, you’ll need to spend years honing your abilities by pursuing a four-year accounting degree and possibly attaining your certification as a certified management accountant (CMA). But if you just want high-level skills to help you as an accountant, you can take online classes and review online learning materials for free to establish a baseline.
Why are accounting skills so important?
So what are the benefits here? How can higher accounting skills help you become a better entrepreneur? There are several advantages:
- Financial mastery: The most obvious benefit is that learning the basics of accounting can help you master the financial side of your business. For a business to succeed, it needs to be profitable. But more than that, it needs to be intelligently managed from a financial perspective. For example, it’s possible even for a profitable business to fail if cash flow turns negative; learning how to manage cash flow as an entrepreneur can help you avoid such a catastrophe. Accounting principles will also help you keep track of business financials, prepare for taxes, and set the business up for success.
- Synergy with your accounting team: Accounting skills can also help you find synergy with your accounting team. Ideally, you’ll hire an entire team of accounting professionals who can help you manage daily tracking of accounts payable, accounts receivable, cash flow, banking, and tax planning. But these professionals will still need your input and guidance. Having a background in accounting will make it easier for you to communicate with these individuals on your team. You can share ideas freely, explain your point of view, and intelligently scrutinize the recommendations they provide you.
- Decision information: Entrepreneurs are typically the primary decision-makers for their young companies. That means you’ll be guiding the business’s development with every choice you make. Having an understanding of accounting fundamentals can help you make better-informed decisions — at least from a financial point of view. For example, if you choose to take on a new client and offer them a discounted rate, how will this affect your profitability? What kind of terms will you be able to extend to them? How much of a financial risk will this represent, and how might it pay off in the future? Similarly, when should you hire someone new to fill a position on your team? Is it overextending the company’s financials to tack on another salary?
- Negotiations: Every entrepreneur quickly learns just how valuable it is to be a skilled negotiator. With improved negotiating skills, you’ll be able to push for more favorable deals with clients, increasing profits without pushing them away. You can push your employees to meet tighter deadlines and rise to new heights. You can even negotiate contracts with vendors and salaries with employees to keep your costs as low as possible. When you have a better understanding of your company’s books (and with finance in general), you’ll be able to prepare a more logical, grounded argument. You’ll also know when to walk away.
Planning for your personal future. Accounting skills aren’t just useful in a business context. They’re also incredibly valuable for planning your personal finances. For example, how much money will you need to save personally each month to retire by the age of 60? How much money will you owe in taxes and what’s the best way to prepare for this expense? How much debt can you afford to take on without adding too much risk? Don’t neglect your own finances in pursuit of your growing business.
With thanks to Entrepreneur.com for this article.
Recent Comments