I. Engage Accountants and/or Tax Practitioners
Engage Accountants and/or Tax Consultants to prepare your management accounts and handle your finance matters. Management accounts can be used for tax planning. Trying to save costs by doing it yourself as a business owner may lead to mistakes or penalties for late tax submissions.
II. Depreciate Assets
Depreciate your assets that devalue over time using the wear and tear rate from SARS’ list of different asset types. Although depreciation is not a cash cost, it is allocated as an expense on the income statement thus reducing your profit and taxes. Some Small Businesses qualify for the Small Business Corporation (section 12E) or Section 12C Manufacturing Assets special wear and tear allowance.
III. Keep All Records
Record all your earnings and spending to ensure accurate records, which will result in submitting accurate tax returns. Additionally, monitor business expenses and keep supporting documents relating to them for five years, as SARS allows deductions for most expenses and may request verification of the expenses included on your tax returns. These deductions may include day to day expenses, capital expenses, education, entertainment, start-up costs, etc.
IV. Allowances and Exemptions
Consult your Tax Practitioner or familiarize yourself with allowances the business qualifies for. For example, if the business builds a building that it owns, it can claim an allowance, or special tax deductions for leased assets.
Consult your Tax Practitioner or familiarize yourself with exemptions the business qualifies for. For example, dividends declared by South African resident companies are generally exempt from normal tax (s 10(1)(k)(i)). Note that foreign company may be subject to dividends tax but dividends paid to resident companies are exempt from both dividends tax (S64 F(1)(a) and normal tax.
V. Write Off Bad Debts
Review your Trade Debtors listing and write-off all bad debts. Bad debts are generally classified as expenses, thus resulting in tax reduction. Make sure you document the bad debt listing as evidence.
VI. Repairs and Maintenance
Consider doing some repairs and maintenance before year end (rental property, business, etc.). Repairs are allowable deductions.
VII. Run Business from Home
Run a small business from home if you are small enough to benefit from tax deductions associated with using your home as business premises. These may include day to day expenses, interest payment on the house bond, etc.
VIII. Stay Informed
Stay up to date on the latest tax information and pay your taxes on time to avoid fines from SARS.
Need tax planning and tax strategy assistance?
Contact us any time. At B-Advisory, we focus on capturing value by strategically planning around your core financial objectives to optimize your tax position. We have proven record in assisting our clients with complicated tax matters and resolving their tax disputes with SARS.
For more information about us, visit our website at https://www.b-advisory.co.za/
“The hardest thing to understand in the world is the tax income.” – Albert Einstein