Your Tax Deadlines for May 2023
- 5 May – Monthly Pay-As-You-Earn (PAYE) submissions and payments
- 30 May – Excise Duty payments
- 31 May – Value-Added Tax (VAT) electronic submissions and payments & CIT Provisional payments where applicable.
Setting Up Your Finances in a New Business
“A house built on granite and strong foundations, not even the onslaught of pouring rain, gushing torrents and strong winds will be able to pull down.” (Haile Selassie, Former Emperor of Ethiopia)
When starting a new business, few things are as important as establishing your finances and making sure they are right. Building the foundation for stable, accurate financial reports and tax filing will see you in good stead in the future and establish the practices that will lead your company to success. Here are the top seven tips.
- Set up a deadline calendar
Whether you use a large whiteboard in your office, or a digital reminder service like Google Calendar, it is vital that you track which payments are due and when. Whether it’s your staff salaries, business loan payments or accounts payable, you need to know exactly when each amount is due in order to plan your cash flow accurately. Not having the cash on hand when a payment is due not only hurts your business credit rating but can also cost you more in fines or late-payment fees.
- Monitor your accounts receivable
Just because you have invoiced a client doesn’t mean that money is immediately coming in. Check the terms of each client’s contract to understand exactly when they are likely to pay. If a client pays on a 60-day cycle it is unreasonable to expect the money will come in before that and you therefore need to plan other ways to have cash on hand to meet payments. For each invoice make a note on when it is likely to be paid.
- Track your inventory
Inventory on hand is as much a part of your finances as the actual cash in your bank. Are you ordering too much and letting things rot on the shelves, or are you ordering too little and being forced to pay for rush deliveries to meet your orders? Tracking inventory will allow you to make better purchase decisions and streamline the operations of your business thereby reducing costs and stress.
- Consider opening two business bank accounts
Account 1: It is vital that you be able to track all expenses you are incurring in order to make accurate business decisions and monitor your business spending. To do this you will need one bank account in the name of the business dedicated to the daily running and expenses of the business. This will allow you to accurately reconcile the account at the end of the month and see whether more money is coming in than going out. Don’t have more than one daily operations account, and don’t use your personal accounts to pay business expenses – if you do, monitoring your cash flow, income and expenses becomes that much harder.
Account 2: The second account you should think of opening is a savings account, into which you will deposit a percentage of each month’s income to cover the taxes at the end of the year. The last thing you want to do is arrive at year-end unable to afford what you owe to SARS. Ideally, you should pay more than you owe on taxes alone into this account to also build a cash reserve. This cash reserve will see you through difficult times or cover unexpected expenses.
- Get a bookkeeper
Whether you get a bookkeeper or download bookkeeping software, it is vital that you keep track of all your incomings and outgoings. QuickBooks, Wave, Zoho Books, Xero, and FreshBooks are a few examples of the best apps for small business owners. Apart from making the issuing and tracking of invoices easier, knowing exactly which jobs have been invoiced, which have been paid and which are still owing as well as to whom, and how much you owe, will help you to plot payments, make cash flow decisions and price your product more accurately. Moreover, come tax time, you will have all of the paperwork necessary to give to your accountant to ensure as favourable a tax season as possible.
- Download a receipt scanning app
Now that your bookkeeper or bookkeeping software is tracking your invoices and accounts, you need to also track and accurately record your expenses that are made independent of your monthly suppliers. Fortunately, there are many receipt scanning apps that will help you to quickly and accurately record each business lunch receipt and stationary purchase, and then add them to an online database. Exactly which one you download will depend on your exact needs, but here are a few to get you started: Zoho Expense, Expensify, Wave, QuickBooks Online and Evernote Scannable.
- Download an app to record business travel
While you can get digital logbooks that you plug into your computer, it is far easier these days to simply download an app that will record each of your journeys automatically in the background on your phone. MileIQ, for instance, is great, because with a simple swipe after each journey you can record whether it was for personal or business reasons, and at the end of the year can print out a full record of all your travels and the related expenses.Setting up your business foundation is essential for the health of your business. Once you have done all of the above, and accurately tracked your expenses and income for the year your accountant will have an easy time saving you money, ensuring you only pay the taxes you owe and not a cent more.
How You and Your Business Can Benefit from SARS’ Solar Tax Breaks
“The lack of reliable electricity supply is the biggest economic constraint… I am pleased to announce two tax measures to encourage businesses and individuals to invest in renewable energy and increase electricity generation.” (Finance Minister Enoch Godongwana – Budget 2023)
In the 2023 Budget, the lack of a reliable electricity supply was highlighted as the country’s biggest economic constraint. South Africans have been subjected to loadshedding every day of 2023, often at stage four, five or six. Recent research by the Bureau for Economic Research revealed more load-shedding in the first two months of 2023 than in all of the previous four years. It is a situation expected to deteriorate even further as demand rises with the winter months approaching.
To encourage businesses and individuals to invest in renewable energy and to increase electricity generation, government announced two tax measures in the 2023 Budget in February. The first will provide R5 billion in tax relief to companies through an expansion of the renewable energy incentive, and the second will provide R4 billion in tax relief for households that install solar panels. Both entail a number of conditions and requirements, as well as tight timelines, which are summarised below.
The expanded tax incentive for businesses
To encourage rapid private investment to alleviate the energy crisis, this is a temporary expansion of the existing tax incentive Section 12B of the Income Tax Act, which provides for capital expenditure deductions for assets used in the production of renewable energy.
It originally allowed businesses to deduct 50% of the costs in the first year, 30% in the second and 20% in the third for qualifying investments in wind, concentrated solar, hydropower below 30 megawatts (MW), biomass and photovoltaic (PV) projects above 1 MW, and provided an accelerated capital allowance of 100% in the first year for solar PV energy projects of less than 1MW.
This incentive has now been temporarily expanded as outlined below.
Highlights of the expanded incentive
- Under the expanded incentive, businesses will be able to claim a 125% deduction.
- Moreover, that deduction can now all be claimed in the first year.
- Businesses will be able to reduce their taxable income by 125% of the cost of renewable energy assets used for electricity generation.
- The adjusted incentive will only be available for investments brought into use for the first time between 1 March 2023 and 28 February 2025.
- The deduction applies to all renewable energy projects.
- There will be no thresholds on the generation capacity size of the projects that qualify.
- The expanded incentive is only available for two years from 1 March 2023 to 28 February 2025 to stimulate investment in the short term.
Example: business renewable energy tax incentive
For businesses with a positive taxable income, the deduction will reduce tax liability. For example, a renewable energy investment of R1 million would qualify for a deduction of R1.25 million against taxable income.
Using the current corporate tax rate (27%), this deduction could reduce the corporate income tax liability of a company by R337,500 in the first year.
Tax rebate for individuals
This is a new tax incentive available for a very limited period to encourage individuals to install rooftop solar panels to increase electricity generation and reduce pressure on the grid. Individuals can claim the rebate against their personal income tax liability.
Highlights of the individual tax rebate
- This incentive will be available for one year between 1 March 2023 and 29 February 2024.
- Individuals who install rooftop solar panels will be able to claim a rebate of 25% of the cost of the panels, up to a maximum of R15 000 per individual.
- The rebate can be used to reduce tax liability in the 2023/24 tax year. PAYE taxpayers can claim the rebate on assessment during the 2023/24 filing season, while provisional taxpayers can claim the rebate against provisional and final payments.
- There is no ownership limitation, so installations by either landlords or renters are eligible, but only the party that pays for the solar panels can claim the rebate.
- The rebate applies only to new and unused solar PV panels with a minimum capacity of 275W per panel (design output), installed as part of a new system, or as an extension of an existing system, which must be connected to the mains distribution of the residence (i.e. no off-grid installations qualify).
- The rebate is only available for solar PV panels (excluding portable panels), and not for other components of a system such as batteries, inverters or fittings. Installation costs do not qualify.
- The solar panels must be purchased and installed at a private residence used mainly for domestic purposes (i.e. dual-use residences such as a guest house or Airbnb used more than 50% for trade, will be excluded).
- A certificate of compliance for the installation must be issued between 1 March 2023 and 29 February 2024 and the certificate must confirm the date the solar panels purchased were brought into use for the first time.
- To claim, taxpayers will need a VAT invoice that indicates the cost of the solar PV panels separately from other items, along with proof of payment.
- There will be no recoupment if the residence is sold after claiming the rebate, but there will be a claw-back if the panels themselves are sold within one year.
- SARS has issued draft third-party regulations for comment that will require solar installers to report to SARS the complying installations they have completed together with the details of the purchaser.
- Like other rebates, it may only be claimed against tax payable and only to reduce the tax payment to nil. If the tax payable is less than the rebate, the balance is forfeited.
Example: tax rebate to individuals
An individual who purchases 10 solar panels at a cost of R40,000 will be able to claim 25% of this R40,000 cost – or R10,000 as a rebate. This means that the individual’s personal income tax liability that is payable for the 2023/24 tax year can be reduced by R10,000.
Another individual who buys 20 panels at a cost of R4,000 per panel, will have invested a total of R80,000. The calculation of 25% of R80,000 amounts to R20,000, but only R15,000 can be claimed against income tax liability for the 2023/24 tax year, as the deduction is limited to R15,000 per individual. If the tax payable is less than R15 000, the rebate is reduced to the amount of tax payable. The balance of the rebate is thus forfeited.
Given the many conditions and requirements, as well as the tight timelines, professional tax advice is recommended before installing solar power or renewable energy alternatives, to ensure the full benefit of these time-limited tax incentives can be realised.
Your Tax Deadlines for April 2023
- 1 April – Start of the 2022/23 Financial Year
- 6 April – Monthly Pay-As-You-Earn (PAYE) submissions and payments
- 26 April – Excise Duty payments
- 28 April – Value-Added Tax (VAT) electronic submissions and payments & CIT Provisional payments where applicable.
5 Business Plan Mistakes to Avoid
Writing a business plan can feel like a daunting process, and making mistakes is part of the package, even if you follow the online guides and templates. To make this process simpler, we have made a short list of common errors that somehow keep creeping into these vital documents.
Making it too long
As Amazon founder Jeff Bezos once said, “You know the business plan won’t survive its first encounters with reality. It will always be different. The reality will never be the plan.” He did, however then go on to stress that writing a business plan is essential to understanding what will make your business tick. It’s important to realise that your business plan will never be able to cover every contingency and every possible incident that can occur and should rather be focused on revealing the core business. Once you understand your core business implicitly, you will be able to write it down in a much more succinct fashion. A long business plan is therefore only evidence that you don’t yet understand what’s going on.
Understand your target market
No product is for everyone. Understanding who you are selling to and what will motivate them to buy is the first thing any investor will look for, and the most fundamental thing you will need to understand to be successful. It will shape who you hire, what your marketing looks like, and even what your startup’s logo will be. Simply believing you will market to everyone is putting your business on the path to failure.
Ignoring competitors
It is extremely common for companies to exclude business competitors from their business plan. Many believe that their new product is so superior, cheap or well-supported that competitors won’t stand a chance once it is marketed correctly, or simply don’t have as much understanding of the market they are entering as they think they do. Having a sound, realistic competitor analysis shows investors you understand the market and know where your unique differentiators lie.
Neglecting a financial forecast
Many business plans ignore financial forecasts as they either don’t have the experience necessary or don’t believe they are important – of what use is guessing things that don’t exist? The truth is that a good financial planner or accountant should be able to help with these forecasts which need to include profit and loss, but also, essentially, cash flow and balance sheet. This area of the business plan will reveal to potential investors whether your plan has been carefully thought out, and takes realistic rates of growth into account, or whether it’s simply pie in the sky. No investor is going to work with someone who believes they will sell a million items in the first three months.
Being too strict
The business plan should always be viewed as a guide and not as a set of hard and fast rules. Any business plan that locks a business into a specific course of action is a bad one. You should always have the ability to pivot and make changes as necessary based on the latest feedback. Your ability to research new information and change direction will make it much more likely that your business will meet its long-term goals and needs.
Why (and How) to Submit Skills Development Reports by 30 April
Since 1999, the Skills Development Levy (SDL) has served to fund skills development in the country. It encourages a planned and structured approach to skills development so employers, employees and the economy can benefit from a better skilled and more productive workforce.
All South African companies with a payroll exceeding R500,000 per year (that’s just under R42,000 per month) – including salaries, wages, overtime payments, leave pay, bonuses, fees, commissions and lump sum payments, and with certain specific exclusions – are required to pay SDL of 1% of the total amount paid in salaries to employees each month. It is declared and paid by employers to SARS with the other monthly employee taxes (PAYE and UIF) via the Monthly Employer Declaration (EMP201) and is then paid over to the relevant SETA by SARS.
Employers can claim back more than half of the levies paid each year, but most miss the opportunity by not meeting the stipulated requirements. Depending on the size of a company’s payroll, this could be a substantial amount. There are also other benefits that can be unlocked by meeting the requirements for claiming back the levies paid.
We briefly summarise below the benefits of claiming back the SDL paid, as well as how to do it in the most efficient way.
Benefits of claiming back levies paid
- Claiming ensures valuable revenue is not forfeited – up to 70% of SDL paid to SARS in the financial period can be claimed back through the mandatory grant and other avenues.
- 20% of the levy paid can be claimed via the mandatory grant, paid by the Seta every quarter, which is accessed as follows:
- Appointing and registering a skills development facilitator (SDF)
- Timeously submitting an approved Workplace Skills Plan (WSP)
- Timeously submitting an Annual Training Report (ATR) based on the WSP.
- 50% of levies paid can be claimed in discretionary grants for learnerships, skills programmes, apprenticeships, workplace experience placements, internships and bursaries, and organisations can apply using the same requirements for claiming the mandatory grant.
- By offering SETA-accredited training, for example, mandatory training and registered learnerships, further tax rebates can be accessed.
- Successful submission of the required reports will earn your company points for the Skills Development priority element under the revised B-BBEE Codes.
- The WSP and ATR reports contain similar labour demographics information as the Employment Equity reports, facilitating improved employment equity management in the workplace.
- Skills development initiatives positively promote a better skilled and more productive workforce, as well as proper succession planning.
- Submitting the reports provides important sector information to the SETAs (Sector Education and Training Authorities), which informs the development of the SETA’s sector skills plan (SSP) and ultimately the National Skills Development Plan.
How to claim back levies paid
- Appoint a suitably qualified and registered SDF to facilitate the training needs within the organisation and liaise with the SETA.
- Companies with 50 or more employees need to establish and consult with a Skills Development Committee before the submission of the skills report.
- Submit the Workplace Skills Plan and Annual Training Report for the period 01 April to 31 March via a registered SDF to the SETA with which the business is registered.
- Workplace skills plans detail a company’s skills needs and the skills development interventions to address these needs, providing access to mandatory grants.
- Annual training reports reflect the actual training data of the previous year, showing how priority skills defined in the Workplace Skills Plan have been addressed.
- Keep records of all training provided, including attendance registers, invoices and all certifications.
Ask your accountant for help if you are uncertain about anything.
UDZ Tax Incentive Extended: Could Your Business Benefit?
The urban development zone (UDZ) tax incentive, provided for in section 13quat of the Income Tax Act (the Act), was introduced 20 years ago in 2003, as an accelerated depreciation allowance for property investments in certain central business districts. It aims to promote investment by the private sector in the construction or improvement of commercial and residential buildings, including low-cost housing units, situated within demarcated UDZs.
In the most recent 2023 Budget, this incentive was extended for another two years, to allow for the completion of a review of the incentive, which has yielded some successes, by motivating investment in South Africa’s cities. We briefly overview below what the tax incentive entails and the criteria that must be met, where it applies and other issues to take note of when deciding if it could benefit your business before it expires at the end of March 2025.
What the UDZ tax incentive entails
Individuals and companies investing in residential or commercial property in South Africa’s urban zones from which to carry on a trade, should carefully consider the UDZ tax incentive before deciding where to buy.
This tax allowance, when deducted, can substantially reduce the taxable income of a taxpayer, and – because the allowance is not limited to the taxpayer’s taxable income – can create an assessed loss.
However, five specific criteria must all be met before the allowance is granted. In addition, only certain costs can be considered for the purposes of the allowance. These are listed below, along with the UDZs listed by SARS, and some further issues to take note of.
Five criteria to be met
- Building requirement – The building must meet certain requirements, and only the cost of the erection, extension, addition to or improvement of the building, covering either the entire building or a floor area of at least 1,000m2 qualifies. Land costs are excluded.
- Urban development zone requirement – The building must be located within a UDZ.
- Trade requirement – A taxpayer will qualify for the allowance only if the relevant commercial or residential building or part of the building is used by the taxpayer solely for the purposes of trade, and only once the building has been brought into this use.
- Owner requirement – The building or part of the building that was erected, extended, added to or improved must be owned by the taxpayer deducting the allowance. Where the building or part of a building was purchased directly from a developer within three years after completion, an allowance may be deducted, provided the developer did not deduct any allowance, among other criteria.
- Date requirements – There are specified dates to which the allowance applies, including a commencement date requirement and a trade date requirement.
Costs that may be considered – and those that are not
- Construction work
- Architect and approval fees
- Sidewalks
- Parking for the building
- Landscaping as part of the development (including earthworks, greenery and irrigation)
- Drainage
- Security (fences, cameras and surveillance equipment)
Costs specifically excluded are the purchase price of the land, VAT and transfer duty, financing charges, agent’s commission and transfer and related legal costs.
Where does the UDZ tax incentive apply?
- Buffalo City
- City of Cape Town
- Ekurhuleni
- Emalahleni
- Emfuleni
- eThekwini
- Johannesburg
- Mangaung
- Matjhabeng
- Mbombela
- Msunduzi
- Nelson Mandela Bay
- Polokwane
- Sol Plaatje
- Tshwane Metro
Source: SARS
Other issues to take note of
- Depending on the type of development involved – new, improved or low-cost – the allowance is calculated at a different rate of depreciation, providing for 20 – 25% of the costs allowed to be deducted in the first year, and the remainder over one to ten years.
- When purchasing a building or part of a building from a developer, 55% of the purchase price of a new building, or 30% of the purchase price of a building improved will be allowed as costs for purposes of the UDZ incentive.
- The UDZ incentive is an accelerated depreciation allowance, and not an additional tax allowance. A taxpayer claiming a UDZ deduction may not claim any other deductions on that building or part of the building.
- For each building or part of a building on which the allowance is being deducted, you will need the necessary UDZ forms (UDZ 1, 2, 3 and 4 forms), as well as a location certificate and, where applicable, a certificate of occupation.
Taking advantage of this tax incentive, if it applies to you, could mean a difference of millions of rands to your future tax bill. However, this is a very complex tax incentive and there are many issues to be considered.
It is highly recommended that business owners consult with their accounting and tax practitioners to find out if they would qualify for the maximum allowance when investing in a UDZ, and to do so while still ticking all the compliance boxes.
Your Tax Deadlines for March 2023
- 7 March – Monthly Pay-As-You-Earn (PAYE) submissions and payments
- 30 March – Excise Duty payments
- 31 March – End of the 2022/23 Financial Year
- 31 March – Value-Added Tax (VAT) electronic submissions and payments & CIT Provisional payments where applicable.
Budget 2023: Your Tax Tables and Tax Calculator
The big Budget Speech 2023 tax news was the introduction of tax incentives for investing in rooftop solar and renewable energy. The Budget also detailed tax relief in the form of adjusted tables for tax and rebates for individual taxpayers, adjusted tables for retirement tax and transfer duty, and the expected increases in ‘sin’ taxes. How will these changes affect you directly?
To better understand the impact of the Budget on you and your business, here is a selection of official SARS Tax Tables, then follow the link to Fin 24’s Budget Calculator to do your own calculation.
Businesses – corporate tax rates unchanged*
Source: SARS’ Budget Tax Guide 2023
Individual taxpayers – tax tables adjusted
Source: SARS
Source: SARS
Source: SARS
Transfer duty table – adjusted
Source: Budget 2023 People’s Guide
Sin taxes raised
Source: Budget 2023 People’s Guide
How much will you be paying in income, petrol and sin taxes?
Use Fin 24’s four-step Budget Calculator here to find out the monthly and annual impact on your income tax, as well as what you will pay in future in terms of fuel and sin taxes, bearing in mind that the best way to fully understand the impact of the announcements in Budget 2023 on your own and your business affairs is to reach out for professional advice from your accountant.
Budget 2023: How It Affects You and Your Business
“This is not an austerity budget. It is a budget that makes tough trade-offs in the interests of the country’s short and long term prosperity.” (Finance Minister Enoch Godongwana – Budget 2023
Finance Minister Enoch Godongwana’s second Budget contained no major tax proposals, thanks to an improvement in revenue from higher collection in corporate and personal income taxes, and in customs duties.
Instead, the focus of Budget 2023 was firmly on the current energy crisis, which has resulted in a State of Disaster being declared. It announced that government will take over R254 billion of Eskom’s debt over the next two years, subject to stringent conditions.
Of the tax relief amounting to R13 billion to be provided to taxpayers in 2023/24 announced in the Budget, R9 billion is earmarked to encourage households and businesses to invest in renewable energy. More specifically, R4 billion in relief is provided for households that install solar panels and R5 billion to companies through the expansion of the existing renewable energy incentive.
These incentives are briefly detailed below, along with some of the other announcements that will impact individuals and businesses.
Budget announcements that will impact you personally
- A new tax incentive to install rooftop solar panels: For one year from 1 March 2023, individuals will be able to claim a rebate of 25% of the cost of installing rooftop solar panels, up to a maximum of R15,000, to reduce their tax liability in the 2023/24 tax year.
- The personal income tax brackets will be fully adjusted for inflation, increasing the tax-free threshold from R91,250 to R95,750.
- Medical tax credits per month will be increased by inflation to R364 for the first two members, and to R246 for additional members.
- The retirement tax tables for lump sums withdrawn before retirement and at retirement, will be adjusted upwards by 10%, increasing the tax-free amount at retirement to R550,000.
- Revised draft legislation on the ‘two-pot’ retirement system will be published, including the amount immediately available at implementation from 1 March 2024. Withdrawals from the accessible “savings pot” would be taxed as income in the year of withdrawal.
- Social grants will increase in line with CPI inflation. The R350 grant will continue until 31 March 2024.
- Increases in the excise duties on alcohol and tobacco of 4.9%, in line with expected inflation. This means that the duty on:
- a 340ml can of beer increases by 10c,
- a 750ml bottle of wine goes up by 18c,
- a 750ml bottle of spirits will increase by R3.90,
- a 23g cigar goes up by R5.47,
- a pack of 20 cigarettes, rises by 98c.
Budget announcements that will impact your business
- Expanding the existing section 12B tax allowance for renewable energy, businesses will now be allowed to reduce their taxable income by 125% of the cost of an investment in renewables for two years from 1 March 2023. There will be no thresholds on the size of the projects that qualify. According to National Treasury, where a renewable energy investment of R1 million is made by a business, that business will qualify for a deduction of R1,25 million, which could reduce the corporate income tax liability of a company by R337,500 in the first year of operation.
- The existing Bounce Back Loan Guarantee Scheme will be updated to become the Energy Bounce Back Scheme, to be launched in April 2023. Government will guarantee solar-related loans for small and medium enterprises on a 20% first-loss basis.
- The research and development tax incentive will be extended for 10 years and will be refined to make it simpler and more effective.
- The urban development zone tax incentive will also be extended, by two years.
- Manufacturers of foodstuffs will for two years (from 1 April 2023) also qualify for the refund on the Road Accident Fund levy for diesel used in the manufacturing process, such as for generators, to ease the impact of the electricity crisis on food prices.
Budget announcements that will impact all
- Providing tax relief of R4 billion, the general fuel levy and the Road Accident Fund levy will not be increased this year. However, the carbon fuel levy will increase by 1c to 10c/l for petrol and 11c/l for diesel from 5 April 2023.
- The health promotion (sugar) levy will remain unchanged for the following two fiscal years.
- The brackets of the transfer duty table will also be increased by 10%, allowing properties below R1.1 million to avoid any transfer duty payments.
How best to manage these changes and their impact?
In addition to the announcements detailed above, there were other technical amendments proposed in the Budget review that will require professional advice.
As tax collection remains government’s main source of income, you and your business would do well to rely on the expertise and advice of tax professionals as you determine the impact of the Budget 2023 announcements on your tax affairs.
