“[The new requirements] enable… a more efficient process to make deductions available to qualifying donor taxpayers and to help prevent section 18A claims abuse.” (SARS)
Many are dependent on donations and, to encourage the public’s generosity, a tax deduction for certain donations made by taxpayers is provided.
Qualifying PBOs (i.e. section 18A-approved organisations) may issue tax certificates – called section 18A receipts – to donors. This tax certificate – or section 18A receipt issued by a section 18A-approved organisation – entitles you or your company to a deduction from taxable income for bona fide donations in cash or of property.
While approved section 18A institutions were previously required to keep records of all section 18A receipts issued, the requirements have changed, affecting both PBOs and their private and corporate donors.
PBOs: New requirements, and a 31 May 2024 deadline
Previously, the information that had to be provided by a PBO for a valid section 18A certificate was limited to the details of the PBO; details of the date, amount or nature of the donation; confirmation of how the donation would be used; and the name and address of the donor.
Last year, SARS issued further requirements for more detailed information to be included on all section 18A certificates issued from 1 March 2023. This includes the nature of the donor; the donor’s identification or registration number; donor trading name (if different from the registered name); donor income tax reference number; donor contact number and e-mail address; and a unique receipt number.
In addition, this year – like other third parties such as the banks, medical schemes and fund administrators required by law to send data to SARS – all PBOs are now also required to submit bi-annual reports – called an IT3(d) – to SARS. The first deadline for PBOs in this respect is 31 May 2024.
From this date, approved section 18A tax exempt institutions must submit data on section 18A tax deductible receipts issued, which includes information on the S18A approved tax exempt institution, donation information and donor information for the 2023/2024 year of assessment (i.e. S18A receipts data from 01 March 2023 to 28 February 2024) by submission of IT3(d) data via efiling.
Professional assistance is essential
While it has always been best practice to check with your accountant first before making a donation and relying on the tax break, it is now more crucial than ever for companies and individuals to ensure that the PBO being supported, as well as the tax certificate – or section 18A receipt – issued to obtain a tax deduction, meet SARS’ new requirements. Also remember to check the limits: the amount of donations which may qualify for a tax deduction is limited to up to 10% of taxable income.
We can also help PBOs to ensure they can meet the new requirements and deadlines, to ensure compliance and that their donors can enjoy the tax breaks that will encourage generous giving.
“The cold, harsh reality is that we have to balance the budget.” (Michael Bloomberg, former New York City Mayor)
Budget shortfalls are not uncommon across the public and private sectors, especially in these economically challenging times. A budget shortfall is a significant concern for any individual or organisation and should be corrected promptly.
To address the R15 billion shortfall in National Budget 2024, the South African government earlier this year did not cut its spending, but rather indirectly raised individual taxes by not adjusting personal tax brackets, rebates and credits for inflation, as well as proposing above-inflation increases in sin taxes.
Of course, these strategies are not available to South African individuals and businesses, but nevertheless, as Michael Bloomberg, former Mayor of New York City reminded us: “The cold, harsh reality is that we have to balance the budget.”
This is because a budget shortfall – when financial obligations or liabilities exceed the amount of cash available – tends to impact negatively on business by, for example, necessitating spending cuts that could adversely affect critical operations, or by requiring an increase in debt to finance the shortfall.
On the other hand, maintaining a balanced budget ensures expenses do not exceed revenue, promoting financial stability and avoiding additional debt. By providing a clear demarcation of the available resources and financial capabilities, a balanced budget facilitates informed decisions, long-term planning and sustainable growth.
There are different types of budgets for various purposes, such as day-to-day operational budgets, cash flow budgets, long-term capital budgets, and master budgets combining various budget types for a comprehensive overview of the company’s overall financial health.
These budgets include elements such as revenue estimates; fixed, variable and one-time costs; cash flow projections; and profit projections. We are able to assist you with choosing the right approach for your business’ specific budgeting requirements.
Strategies for balancing your own business and personal budgets
If you are facing a budget shortfall, the tried and tested strategies below for balancing a budget may be helpful. While these approaches are business-orientated, each can be adapted to balance your personal budget too.
For example, a shortfall can be temporary, perhaps the result of a specific set of circumstances, or it can be persistent, which might indicate poor financial management. Your accountant will also be able to assist in this respect.
Some of the tactics to consider include, for example, cutting all non-essential expenses, across-the-board cuts, targeted cuts in specific areas, or even financial modelling or projections that calculate the combined impact of various approaches.
Not all cost-cutting measures are the same and it is more effective to prioritise cost cutting initiatives based on potential impact and feasibility. Prioritising high-impact initiatives can deliver quick wins, building momentum for further spending cuts.
Process optimisation could involve re-organising workflows, automating processes, adopting lean management principles, or even outsourcing certain functions or utilising shared services.
You might also consider partnering with other businesses or organisations, or embracing new technology, such as e-commerce, for generating additional income.
Debt may also be a short-term solution but be sure to understand the immediate and long-term consequences, given your current and projected financial situation.
We can provide invaluable advice and assistance if you are considering this option.
Remember to involve your employees, suppliers and other stakeholders, who often have valuable insights into areas where budgets can be optimised. Communicate clearly about the financial situation and reasons for any budget adjustments, acknowledging the impact on the team and stakeholders, and providing opportunities for them to provide input and ideas to mitigate the impact on their activities.
Maintaining a balanced budget is crucial to financial stability and sustainable business growth. It empowers business owners and managers in understanding the company’s financial health, setting realistic goals, planning for contingencies, and capitalising on opportunities.
We can assist you to prepare a budget tailored specifically to your business, to monitor your team’s budget performance, and to make budget adjustments as required, setting your business up for both resilience and sustainable growth.
“Our bigger challenge… is that our pie is not growing fast enough and this limits our ability to generate sufficient revenues to distribute among our priority areas.” (Finance Minister Enoch Godongwana – Budget 2024)
Finance Minister Enoch Godongwana’s third Budget Speech in an election year contained few surprises, but also little in the form of good news, especially for South Africa’s personal income tax payers.
The Minister quoted dismal local average expected real GDP growth of 0.6% for 2023, which is projected to reach 1.6% between 2024 and 2026. This poor economic performance is ascribed to the persistent constraints in electricity supply and freight, rail and ports, as well as a high sovereign credit risk.
And the result? A sharp drop in tax revenue collection for 2023/24 which, at R1.73 trillion, is R56.1 billion lower than estimated!
To make up the shortfall, Budget 2024 contains tax measures that will raise an additional R15 billion in 2024/2025, mainly through income tax raised by not adjusting personal tax brackets, rebates and medical tax credits for inflation, as well as above-inflation increases in alcohol and tobacco excise duties.
Other main proposals included no increase to the general fuel levy for 2024/25, a global tax on multinational companies in South Africa with an annual revenue exceeding €750 million and the R150 billion withdrawal from SA’s Gold and Foreign Exchange Contingency Reserve Account.
These announcements are briefly detailed below, along with some of the other announcements that will impact individuals and businesses.
Budget proposals that will impact you
Budget proposals that will impact your business
Budget proposals that will impact all
How best to manage your taxes going forward?
In addition to the announcements detailed above, other technical amendments proposed in the Budget 2024 may also require professional tax advice.
Furthermore, as tax collection remains government’s main source of income, you would be well-advised to rely on our expertise and advice as we determine the impact of the Budget 2024 announcements on your tax affairs.
Budget 2024 effectively brought an increase in personal income tax by not adjusting the tables for tax rates, rebates and medical tax credits, while also implementing substantial increases in ‘sin’ taxes and introducing a proposed global tax on multinational companies.
This selection of official SARS Tax Tables and other useful resources will help clarify your tax position for the new tax year. Then follow the link to Fin 24’s Budget Calculator (just follow the four-step process) to perform your own calculation.
Individual taxpayers – tax tables unchanged
Source: SARS
Source: SARS
Source: SARS
Businesses – Corporate tax rates – extended
Sources: SARS’ Budget Tax Guide 2024; Budget Speech 2024
Sin taxes increased
Source: Budget 2024 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 2024 on your own and your business affairs is to reach out to us for professional advice.
“It’s far better to buy a wonderful company at a fair price, than a fair company at a wonderful price.”- (Warren Buffett, investor, businessman and philanthropist)
When buying a small business there are a number of things that need to be checked before pulling the trigger and signing the contract. Doing proper due diligence will ensure you don’t invest hard earned money on a lemon. Here are the five most important things to look out for.
Carefully examining the finances of the company is vital and bringing an expert on board to do it for you will ensure you don’t miss those hidden details that could be signs of a faltering company. Let us examine your past financial statements and tax returns for you to discover trends and establish whether sales are on the way up or down.
We will also look closely at the assets and liabilities of your company, review the status of any inventory, equipment, and physical assets and analyse your likely costing for maintenance, necessary upgrades and stock issues. This is all essential as buying a company and then finding yourself in an immediate cash flow crisis is the worst possible start to your hopeful new venture.
Does the company you are buying depend on one invention or many? If so, have those inventions been patented, copyrighted or trademarked? And just who owns those things? It’s no good buying a business only to find you now owe the former owners for the rights to using their creations.
The first step is to examine the internet for reviews. Perhaps the previous owners have been rude and undermined any goodwill that should have arisen from an otherwise excellent concept? Maybe the much-vaunted invention isn’t quite as good as expected?
Speak to key customers and ask them their opinion on a takeover. Does it bother them or will they stay on with the company when it has been sold? Does the goodwill of the business rest with the product and the business itself or is it personal to the current owners?
Where possible conduct employee interviews to fully understand what they think of the company, how they believe it can be improved and whether they are planning on staying on if there is a new owner. The employees may be able to spot gaps or weaknesses you may not easily see, but more importantly may also reveal undiscovered areas for expansion.
A full employee analysis will, with the help of your accountant, also help you determine just where there are gaps that need to be filled, what training still needs to be done, and most importantly, what all of that will cost.
Take a look at any long-term existing contracts. Anything from a rental agreement to a customer service contract could reveal problems. Are there any burdensome terms and conditions that you will be locked into? Is there a customer who has to be serviced at an impossible rate, or a landlord who is expecting ten years of rent before you can move your headquarters? What are the costs of exiting these contracts, and can you afford them if necessary?
“At least 40% of all businesses will die in the next 10 years… if they don’t figure out how to change their entire company to accommodate new technologies.” John Chambers, former CEO of Cisco Systems)
Around the boardroom tables of the world, one thing is on every agenda – digital transformation. From global conglomerates to SMEs, leadership is keenly aware that in a digital world, those who do not adapt will quickly become irrelevant. In fact, a recent study revealed that 55% of businesses believe they have less than a year to digitalise before they start to suffer financially and lose market share. Businesses must adapt to stay ahead of the game.
By integrating advanced technologies across all aspects of the enterprise, businesses are able to significantly improve a business’s efficiency by automating manual processes, reducing errors and improving productivity. This allows them to not only keep up with the competition, but also to enjoy greater efficiency, productivity and customer satisfaction. This process of implementing these modernising technology advancements is referred to as a digital transformation.
However, the process of digital transformation is not one a company should enter into lightly as it’s not simply about implementing the latest technology and tools. The goal of digital transformation isn’t just to eliminate manual processes, but to augment your operations, streamlining workflows and improving the customer experience. This must all be considered within the context of your budgets, timelines and overall business goals, while managing organisational risks. As a result, it’s imperative to develop a digital transformation strategy which takes into account all of these aspects and potential pitfalls of an overhaul of this nature.
Get buy in from the highest levels
A digital transformation is a necessary change, but it can’t work without buy in and leadership from the top down. This is something the company needs to do together, and some tough choices are coming. With a likely high price tag and disruptions on the cards, the company is about to go through a challenging time; making sure everyone at the top understands this is a powerful first step.
Analyse your current system
Before embarking on your digital transformation, you will need to know exactly what needs to change. To do this you will need to do a complete, top to bottom analysis of your current technology and systems in order to:
Develop your company mindset
Digital transformations are not as much about technology as they are about change. A thorough digital transformation will likely change the way everything is done in your company and will therefore require a culture of agility, communication and open mindedness.
Leaders will need to take ownership of the transformation and prepare all involved well ahead of any actual proposed developments. Employees, clients and other stakeholders will all need to understand the transformation strategy and how it will affect them. Training sessions will need to be organised and feedback sessions should be incorporated into the strategy at each step to see if the changes are working as proposed. This is an exciting time that will hopefully end up with your employees working on fewer mundane tasks and clients getting better service. Make sure they know that this is what the effort is about.
Budgeting and finances
With so much exciting new technology around it’s easy to get carried away with what you decide to implement. It is important that whatever projects go ahead are done to the benefit of the business and that they do not put pressure on cash flow and savings for other projects. Speaking to your accountant should help you determine which areas are most critical for advancement, and which will have the biggest impact on company operations. They will also be able to assist you in developing a roll out plan, so you can be sure to get all you need within a reasonable timeframe.
Analyse the necessary technologies
It’s one thing to read about these new technologies online and quite another to truly understand how they might impact your workplace. Proper research and expertise need to be included when deciding which elements of cloud computing, edge computing, AI, Data Analytics and Digital Experience will make a difference for your business. Would better reporting help you to make decisions? Do you have a large remote force that needs better organisation? Do you have a factory floor that could do with less wastage? Your business’s needs will determine where you have to invest.
Work with good partners
Your digital transformation is not the time you want to cut corners with your technology partners. When choosing which solutions to use, don’t be afraid to ask the hard questions around whether the technology is scalable and easily adaptable for future needs. Does your partner share the same vision as your organisation? Do they understand your industry? Do they provide support for upgrades and downtimes, and what does that support look like? Will you be down for a day or a month? Does the technology work with your current systems, or will you need to retrain everyone? How future-proof is your partner?
Education and training
Critically, you need time and budget to educate and train your staff on your new systems. It’s futile implementing new technology if no one can use it. This needs to be built into your timeline. As an added benefit, investing in employee training has been shown to increase employee satisfaction, business efficiency and consistency so don’t be afraid to give your employees the skills they need to operate in a modern workplace.
“Great things in business are never done by one person. They’re done by a team of people.” (Steve Jobs)
| There are many benefits to having a great team, and these have been backed up by scientific research around the world.
These include, for example:
Five steps to build your team stronger
This year, build your team stronger with these simple steps, and set your company up to enjoy all the well-documented benefits of great teams – from increased productivity to better problem-solving and innovation – in the year ahead and beyond. |
