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Enhancements to The Income Tax Returns for Trusts (ITR12T)

The following article is an excerpt from our October 2018 newsletter:

On 17 September 2018, SARS implemented several changes to the Income Tax Return for Trusts (ITR12T) in respect of the year of assessment ending on 28 February 2018. If you saved or submitted your 2018 ITR12T prior to the implementation of the latest changes, none of the new fields will be presented for completion. The contents of the return are fully customisable, based on answers to certain questions presented to you for completion.

Some important changes to the ITR12T include:

  • The Trust Type will be pre-populated on the ITR12T. If the Trust Type is Special Trust Type A or B, validation questions will be presented for response, and based on the answers provided, the Trust Type may change;
  • Certain fields on the Income from Local Farming Operations (IT48) and Income from Local Partnership Farming Operations (IT48V) will be pre-populated, and certain fields will now auto-calculate;
  • The Income from Local Farming Operations (IT48) and Income from Local Partnership Farming Operations (IT48V) will now cater for negative currency to be captured;
  • The Trustee will be able to select one or both of the options Vested and Discretionary, if this is applicable to the Trust;
  • A new question pertaining to Imputed Income from Controlled Foreign Companies has been added to the ITR12T wizard. If this is applicable to the Trust, the ITR12T form will display a new container to be completed; and
  • The following fields have been added to the IT12T and ITA34T:
    • Reduction in Debts (s19).
    • Cash contributions to a Rehabilitation Trust Fund (s37A).
    • Amounts in respect of certain (tainted) intellectual property (s23I).

Supporting documentation and additional information

The following documents (at a minimum) are needed in order to complete the Income Tax Return for Trusts (ITR12T) on eFiling:

  • Financial statements and/or administration accounts
  • All certificates and documents relating to income and deductions
  • Proof of any tax credits claimed
  • Particulars of assets and liabilities
  • Details of persons/beneficiaries to whom income, capital and/or assets were distributed/vested.
  • Remember to keep all supporting documents for five years. SARS may request the documents if verification is required.

For professional assistance in completing your trust tax return do not hesitate to contact us.

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President Ramaphosa’s Economic Stimulus Package

The following article is an excerpt from our October 2018 newsletter:

President Ramaphosa recently announced measures to stimulate economic activity. While acknowledging the tough economic environment we are faced with, he appears very
clear on the direction we need to take in order to revitalise our economy albeit over a period of time. The desired outcomes were outlined as follows:

  • Ignite economic activity
  • Restore investor confidence
  • Prevent further job losses while creating new jobs
  • Address urgent challenges faced by vulnerable groups

Areas of economic activity that impact youth, women and small business will be prioritised, focussed mainly townships and rural areas. Key industries include inter alia:

  • Tourism
  • Telecommunications
  • Health
  • Agriculture

South Africa Infrastructure Fund

The stimulus and recovery plan prioritise infrastructure spending as a critical driver of economic activity. Infrastructure expansion and maintenance has the potential to create jobs on a large scale, attract investment and lay a foundation for sustainable economic expansion.

To this end a South Africa Infrastructure Fund will be set up, which will fundamentally transform governments approach to the rollout, building and implementation of infrastructure projects. In essence, the consolidation of infrastructure spend will ensure more efficient and effective use of resources.

As part of the reprioritisation of spending, additional infrastructure funding will be directed as follows:

  • provincial and national roads
  • human settlements
  • water infrastructure
  • schools
  • student accommodation
  • and public transport

We look forward to more detail and clarity in Minister Mboweni’s Medium Term Budget Policy Statement. South Africa needs a positive force to turn around its economic woes, and for government to achieve the difficult task of creating a more equitable and juts society. Our presidents call for South Africans to come together and forge a new path of growth, jobs and transformation needs to be heeded for South Africa to succeed. By the same token government needs to create an enabling environment.

Visit our Newsletters page for more useful information.

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Medium Term Budget Policy Statement (MTBPS)

The following article is an excerpt from our October 2018 newsletter:

Nhlanhla Nene is the first victim of the “State Capture Enquiry”. Just two weeks before presenting a critical MTBPS, he resigned after a massive public backlash regarding his initial non-disclosure regarding his meetings with the infamous Gupta family.

His replacement, Tito Mboweni, has been well received by the markets and public in general. It would appear that his appointment will be positive for South Africa’s economic recovery , and we look forward to his budget speech presentation on the 24th October . While it appears a short time for him to pre-pare, Treasury has a contingent of experts who have prepared the necessary budgets in line with government policy. Minister Mboweni should slot in with ease! 

Fast facts on Tito Mboweni

  • Born on 16 March 1959
  • Master of Arts degree in Development Economics
  • Minister of Labour from May 1994 to July 1998
  • Governor of SA Reserve Bank:  August 1999 to November 2009
  • International adviser of Goldman Sachs International 2010 to date
  • Various honorary professorships and doctorates from SA Universities

Minister Mboweni is clearly up for the challenge and we look forward to his maiden speech on the 24th October. Key issues that should be dealt with on the 24th should include inter alia:

  • President Ramophosa’s economic stimulus package
    • Reprioritising R400 Billion of existing budget
    • More detail on the spend and its impact on growth
  • National Health Insurance Funding
  • Education Funding
  • Implementation of Carbon Tax

We will review the MTBPS shortly after its delivery and inform you of any key issues.

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Third Top Up Due 28th September

The following article is an excerpt from our September 2018 newsletter:

A voluntary provisional tax payment, often referred to as a “top-up” payment, can be made in respect of the third period of provisional tax. The payment is generally not determined through an estimation of taxable income but is instead based on actual taxable income for the year as this figure is often known to the provisional taxpayer when making the top-up payment.

No penalties are levied in respect of the third period. Interest will be levied at the prescribed rate from the effective date until the date of payment if the top-up payment is paid after the effective date.

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How to Choose A Business Partner

The following article is an excerpt from our September 2018 newsletter:

When you are contemplating going into business with someone, either in the form of a joint venture, partnership or as co-owners of a business, there is no way to guarantee that it will work. However, there are some things you can do to try and prevent any problems down the line.

Here is a list of some of those things to look at when deciding:

  • Take your time – Rather delay the start-up of the venture until are ready
  • Don’t duplicate yourself – Your potential partner should have skills, strengths, and personality traits that compliment yours. Yes, definitely you should have a shared vision and values, however in terms of work flow, you might be a “creator” or a “star” (creative, people orientated, sales) and it would not be beneficial to have another “creator” or “star” on board. A mechanic (designing systems) or support person (strong in detail or administration), or even a trader (seeing opportunity) would better compliment the star or creator’s style
  • Be objective – Try to make your decision without any emotional ties or friendship. Have a set of criteria that you are looking for and objectively judge how that potential partner meets those criteria. Evaluate based on skills and personality, not emotional ties
  • He or she must be just as enthusiastic and driven as you are
  • Do background checks – References, criminal checks, past work experience
  • Assign roles and responsibilities and stick to them – Put these into a written agreement. Develop a clearly defined set of functions for each partner- each stick to what each one’s strengths are
  • Protect yourself legally – While trust and integrity are important, as is that “golden” handshake, it is still essential to put everything in writing. The agreement will cover issues you never even considered – that may become vital at a later stage. Set up a buy and sell agreement, backed up by life insurance

Equal input or contribution – Make sure your prospective partner has the means and resources to contribute equally to the business – either financially, in terms of sweat equity, or skills

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Recession – Strategic Thinking, Planning & Action

The following article is an excerpt from our September 2018 newsletter:

Our previous article detailed the technical analysis of our current recession. We need to develop a strategic plan to assess the impact on our lives and businesses, and plan accordingly. Even if you don’t think the current recession will impact your business you still need to have a strategic plan.

The Characteristics of Thinking Strategically:

Opportunity:
What are the opportunities for your company to work more efficiently, serve its customers, or enter into new markets?

Problem solving:
How can you build solutions that serve the interests of the company as a whole? Where your business is failing, you may need to think strategically about how you can improve systems
and operations or find a solution to turn your business completely around.

Vision:
Can you imagine your ideal organisation and then figure out the practical steps for getting there?

The planning phase can be simplified by asking yourself three questions:

  • Where are we now?
  • Where are we going?
  • How will we get there?

A strategic plan presents the company and team members with a clear course of action that aligns with the organisation’s long-term vision. But don’t see the planning document as an end in itself.

Set specific action plans that lead to implementing your goals. It is important to eliminate non-critical actions. You need to implement measures to track progress, so that forward momentum is felt throughout the organisation.

As you start to put your ideas into practice, remember that strategic thinking is not something you do alone. Collaboration is essential for gaining other people’s perspectives on critical issues, as well as their buy-in for solutions. Further, by collaborating with your team members and employees, you build bridges between groups that will serve you well. And by engaging the creativity of your employees, you can boost both their satisfaction and performance. Accountability and high visibility are needed to help drive change. Each measure, goal, data source and initiative needs to have an owner.

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Economy Shrinks By 0.7%

The following article is an excerpt from our September 2018 newsletter:

The South African economy slipped into recession during the second quarter of 2018, shrinking by 0,7% quarter-on-quarter.
This followed a revised 2,6% contraction in the first quarter of 2018.

The widely recognised indicator of recession is two (or more) consecutive quarters of negative growth. South Africa experienced its last recession during the 2008–2009 global financial crisis with three consecutive quarters of economic decline.

The 0,7% downturn in the second quarter of 2018 was a result of a fall-off in activity in the agriculture, transport, trade, government and manufacturing industries.

Agriculture production fell by 29,2% in the second quarter of 2018, following a 33,6% slump in the first quarter. This was largely driven by a decline in the production of field crops and horticultural products. Continued drought conditions in Western Cape and a severe hailstorm in Mpumalanga, resulting in extensive crop damage, also placed additional pressure on production in the second quarter.

The transport industry contracted by 4,9%, largely a result of decreased activity in both land and air transport. Industrial action within the industry, combined with a decline in freight transport, contributed to the slowdown.

The trade industry experienced its second consecutive quarter of negative growth, falling by 1,9%. Subdued sales in both motor and retail trade contributed to the decline. South African household consumption expenditure fell in the second quarter of 2018 compared with the first quarter of 2018, in line with the fall in retail trade sales. Households spent less on products such as transport, food, beverages and clothing.

Government activity decreased by 0,5%, largely because of falling employment numbers in the civil service.

Manufacturing was the third industry to record a second consecutive quarter of negative growth, following in the footsteps of agriculture and trade. Manufacturing activity fell by 0,3%, driven by a fall in the production of electrical machinery, transport equipment and products within the furniture and ‘other’ manufacturing division.

Mining, construction, electricity, finance and personal services experienced positive growth, but not enough to lift overall economic growth out of negative territory. Mining’s growth rate of 4,9% was largely spurred on by a rise in the production of platinum group metals, copper and nickel. Construction activity increased by 2,3%, driven by a rise in non-residential buildings and construction work activities.

The key question is what can we do about it? If you are concerned about trading conditions and a declining economy, feel free to contact us for professional advice in this regard.

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Outsourcing Your Business Needs

The following article is an excerpt from our August 2018 newsletter:

“If you deprive yourself of outsourcing and your competitors do not,
you’re putting yourself out of business”
– Lee Kuan Yew

It is important, as a business owner, to be able to delegate and outsource.

It is often difficult to admit that you cannot do everything yourself, however, the secret to be a successful business owner, is not to persist in doing something that you are bad at, and mistake it for determination, but rather to re-focus on what you do best.

This may mean outsourcing the non-strategic functions in your business, or re-looking at your existing internal resources, which, with a little tweaking, may end up working better than you thought they would.
There is a growing trend to outsource certain functions to outside experts, and the benefits of doing so can be enormous. Given the effectiveness and reach of today’s desktop technology, it does seem to make more and more sense to do so.

The outsourcing process does take some time and effort to get right, and it would make sense to have a framework to benchmark yourself against:

  • Alignment: Is outsourcing the right move for your business?
  • Business case: have you taken all costs into consideration?
  • Culture: can you bridge the cultural difference between your business and the outsourced service provider? Outsourcing will involve building a working relationship with the outsourced service provider and allowing your in-house staff to adjust to the new processes.
  • Delivery: how will you define success?

It is important not to outsource operations that define the core mission of your business, and that are strategic functions. It may also not be a good idea to outsource projects that would involve team interaction or brainstorming. Self-contained tasks or projects are more suited to outsourcing.

It is also very important to remember that when you do outsource, you are outsourcing functions and not accountability. It is therefore important that responsibility is allocated to someone in your business – for follow up and liaison with the outsourced service provider.

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Department of Trade and Industry (DTI) Incentives and Grants

The following article is an excerpt from our August 2018 newsletter:

The DTI provides financial support to qualifying companies in various sectors of the economy. Financial support is offered for various economic activities, including manufacturing, business competitiveness, export development and market access, as well as foreign direct investment.

DTI Incentive Schemes include:

12I Tax Allowance Incentive (12I TAI): offers support for both capital investment and training for new industrial projects that utilise only new and unused manufacturing assets, as well as expansions or upgrades of existing industrial projects.

Automotive Investment Scheme (AIS): designed to grow and develop the automotive sector through investment in new and/ or replacement models and components.

People-carrier Automotive Investment Scheme (P-AIS): which provides a non-taxable cash grant of between 20% and 35% of the value of qualifying investment in productive assets.

Capital Projects Feasibility Programme (CPFP): a cost-sharing grant that contributes to the cost of feasibility studies likely to lead to projects that will increase local exports and stimulate the market for S.A. capital goods and services.

Critical Infrastructure Programme (CIP): aims to leverage investment by supporting infrastructure that is deemed to be critical, thus lowering the cost of doing business and stimulating investment growth.

Export Marketing and Investment Assistance (EMIA): aims to develop the export market for South African product and services and encourages new foreign direct investment into the S.A. but partially compensate exporters for costs incurred in respect of activities aimed at developing export market.

Film Incentives: a package of incentives to promote the film production and post-production industry. These include:

  • Foreign Film and Television Production and Post-Production incentive.
  • South African Film and Television Production and Co-Production incentive.
  • The South African Emerging Black Filmmakers incentive.
  • Manufacturing Investment Programme (MIP): a reimbursable cash grant for local and foreign-owned manufactures who wish to establish a new production facility; expand an existing production facility; or upgrade an existing facility in the clothing and textiles sector.

Sector Specific Assistance Scheme (SSAS): a reimbursable cost-sharing incentive scheme whereby financial support is granted to organisations supporting the development of industry sectors and those contributing to the growth of South African exports.

If you think your business could be eligible for any of these incentives, please do not hesitate to contact us for professional advice in this regard.

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Reimbursive travel allowance

The following article is an excerpt from our August 2018 newsletter:

A reimbursive travel allowance is where an allowance or advance is based on the actual distance travelled for business purposes (that is excluding private use). Such an allowance is subject to a prescribed rate per kilometre of R3.61 per kilometre with effect from 1 March 2018. Historically this allowance was limited to 12 000 km per annum, whereas it is now unlimited subject to actual business kilometres travelled.

Some key points to note:

  • Where the reimbursive allowance does not exceed the prescribed rate per kilometre AND no other compensation is paid to the employee, the amount is not subject to employees’ tax, but the full amount must be reflected on the IRP5 certificate.
  • Where the reimbursive allowance does not exceed the prescribed rate per kilometre however other compensation is paid to the employee, the amount is not subject to employees’ tax, but the full amount must be reflected on the IRP5 certificate.
  • Where the reimbursive allowance exceeds the prescribed rate per kilometre (irrespective of the kilometres travelled), the full amount above the prescribed rate is subject to employees’ tax.
  • Where the reimbursive allowance exceeds the prescribed rate per kilometre (irrespective of the kilometres travelled) and other compensation was paid (travel allowance), the full amount above the prescribed rate is subject to employees’ tax.

Should you have any queries regarding reimbursive travel allowances please do not hesitate to contact us for professional advice.

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