Top tips for optimising tax for your business
The tax season is upon us once again. Instead of allowing it to stress you out, why not see it as an opportunity to optimise your return instead? Here are our helpful tips for getting this right:
- Start by ensuring that you are fully tax compliant. If you are not, along with incurring fines from SARS, you will also run into challenges when it comes to finding investors, obtaining expansion capital and attracting new clients. As a rule, whenever applicable, South African businesses are liable to pay Income Tax, Value-Added Tax, Provisional Tax, Capital Gains Tax and Secondary Tax on Companies.
- Know what you are entitled to claim for. Most small businesses can claim for the majority of expenses incurred through generating income for, and maintaining, their business. This includes stationery, rent for your office or business premises, ICT services, business travel costs, inventory and subcontractors.
- Ensure that you keep an accurate record of all of your expenses, along with any till slips or invoices that relate to them. By keeping these in logical order and filed safely away, you’ll be able to avoid the mad rush that tax season is so well known for, and make certain that your return runs as smoothly as possible. Just to be safe, you might also want to scan these documents and save them on your laptop (or in the Cloud) to allow for easy access in the event that any of the hard copies are lost.
- Keep all documents, slips and invoices for at least five years before getting rid of them. This will safeguard you should SARS ever wish to review previous tax returns for your business.
- Investigate the correct rates of depreciation. From your computers to your office’s air conditioning unit, all of your assets depreciate at different rates. Luckily, SARS has provided a helpful list to follow in this regard, which can be downloaded online via their website.
- Consider applying for a tax directive. If you get more than 80% of your business from one client, you only have a handful of employees and you spend a lot of time working on one of your clients’ premises, a tax directive is advised and will save you plenty of money in the long run.
- Register as a sole proprietorship or partnership to limit red tape and administrative costs. However, keep in mind that you will need to register a company if you plan on applying for a loan in the future.
- Be aware of what type of tax you are liable for. Most small businesses will fall into the ‘Small Business Corporation’ (SBC) bracket, which offers pleasant tax savings. In order to qualify as a SBC, you will need to turn over less than R20 million per annum.
- Find out if you qualify for Turnover Tax. Turnover tax is aimed at micro businesses with a turnover of less than R1 million per annum, with the goal of making it easier for them to meet their tax obligations. Turnover tax replaces Income Tax, VAT, Provisional Tax, Capital Gains Tax and Dividends Tax. As of March 2012, micro businesses that are registered for turnover tax may also elect to remain in the VAT system.
Ultimately, the key to a seamless, stress-free tax return lies in proper preparation and comprehension of the SARS policies, laws and procedures. If you have any queries thereof, you can contact the SARS call centre on 0800 00 7277 (in operation on weekdays between 8am and 5pm).