July 2016

DAYS


Etiquette

Awesome Reward goes to:

Work performance:

  • Roald van der Heiden – Exceeded expectations on the Metalsa audit
  • Fatima Wadia – Fighting the brave SARS battle and securing a VAT refund for a client

Academic performance – Successfully completed all the modules enrolled for with distinctions:

  • Hennie de Beer – 3 distinctions
  • Sean Bushe – 3 distinctions
  • Rabia Sarwar – 2 distinctions
  • Andre Strydom – 1 distinction

We would also like to make mention of the following staff who successfully completed all the modules they enrolled for but unfortunately did not receive any distinctions.  We hope that during the next semester you will obtain distinctions to qualify for the R550 awesome reward:

  • Divan Dixon – 6 out of 6 modules
  • Natasha Bothma – 5 out of 5 modules
  • Sikhanyile Noholoza – 4 out of 4 modules

Farewell to staff members:

We bid farewell to the following staff member:

  • Itumeleng Moshayi

We wish her success in her future endeavours.

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Cost management: 7 tips for cutting business expenses

It is important for every business owner to make a maximum profit, both through sales and by maintaining strict financial discipline within the company. Implement sound practices from the start, and you will reap the benefits later. These seven tips on cost management will be beneficial for your small enterprise.

  1. Watch expenses from day one.

You might think that overspending during the first few months after opening your doors is forgivable, but discipline is needed right from the start. Spend money only on the necessary and always look for cheaper alternatives. Money saved now will reap rewards later.

  1. Don’t confuse business and personal expenses.

When getting ready for tax season, file your personal and business expenses separately. Be honest and keep your accounting books clean to avoid enquiries from SARS.

  1. Keep detailed and accurate purchasing records.

Accurate record keeping helps you manage your business expenses effectively. Record every purchase, from the smallest to the largest, so that it becomes the custom for everyone in the company. In this way you can see where your money is going and you can cut back if necessary.

  1. Shop around for a low-interest credit card.

As a small business there is the possibility of acquiring a credit card with low interest rates, so visit different banks and find the right one for you. Your card should assist you in expanding your business without the worries of growing debt from high interest rates. 

  1. Run reports early and often.

Review your expenses on a weekly basis so that any additions will be picked up immediately. Do this right from the start and include every aspect of your business, including salaries and any new expenses you might have incurred. This is easier than having to backtrack later.

  1. Invest in technology that will last.

Don’t try to save money on inferior technology; rather buy better quality and save on repairs and replacement costs in the long run. You will get more value from the better product and it is also tax-deductible.

  1. Continue financial responsibility.

The skill of budgeting effectively and saving money is imperative for launching a business. Don’t stop saving money after a while; continue to do so and expect the same from your employees. Growing a business is only possible when you accept your financial responsibility. By using these cost management tips your business will become financially more flexible as it expands.

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

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Objecting to an assessment

One of the risks of not using a tax professional to attend to one’s tax affairs arises when SARS assesses an individual’s income tax return.  Quite often, a return submitted is assessed incorrectly, or on a basis in terms of which SARS is disputing certain submissions made by the taxpayer in filing his or her (or even a family trust or company’s) income tax return.

It is then important to have an experienced tax professional at your disposal who is aware of the specifically legislated and prescribed dispute resolution rules that are required to be followed in order to object to an assessment with which the taxpayer disagrees.  The benefit of using a tax professional becomes even more pronounced when considering that individuals without tax experience and knowledge very often do not understand correspondence issued by SARS (and which would be informing the taxpayer of an adverse assessment for example being issued), and further that they can check assessments issued to ensure that these have indeed been issued on the basis on which the relevant return has been filed.

Various requirements exist for a valid objection to be lodged with SARS, and these are prescribed in terms of Rule 7(2) of the Rules published in terms of section 103 of the Tax Administration Act, 28 of 2011, which govern the dispute resolution process where SARS is concerned.  The requirements for a valid objection include that the objection be lodged in the prescribed format and by using the correct form, and that the objection be lodged within 30 business days from the date of the assessment issued.

If a taxpayer is unsure of the basis on which SARS would have issued an assessment, the taxpayer is entitled to first request reasons from SARS for the assessment issued in order to allow them to consider whether lodging an objection would be necessary or not to dispute the assessment (Rule 6).  These reasons, if requested, must be clear enough to allow the taxpayer to understand why SARS would have issued an adverse assessment and to then be able to lodge an objection against the assessment in question if required.  A request for reasons too (as is the case for an objection) needs to be submitted to SARS within 30 business days from the date of the assessment, where after the objection must be lodged within 30 business days of these reasons being provided to the taxpayer (and which SARS is obliged to provide, if requested, within 45 business days from receipt of the request for reasons from the taxpayer).

The Rules further make provision for an unsuccessful objection to be appealed to the Tax Board or the Tax Court, or for the Taxpayer and SARS to enter into ADR (‘alternative dispute resolution’) to have the dispute resolved.

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

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Tips to get the most out of your short term insurance

We take out short term insurance for peace of mind. You pay your premiums regularly and feel safe because you know you are covered should any of your insured assets become damaged. But do you really have the insurance cover you think you have? Are you sure you will be able to claim if your assets should get damaged?

If you pay short term insurance premiums, you want to get the best value for your money and protect yourself against nasty surprises when you need to make a claim. By taking out short term insurance, you undertake to fulfil certain requirements in exchange for insurance cover. If you do not fulfil these requirements, you may not be able to claim for damages against your insurance policy.

Application tips

When you apply for insurance, the insurance company or broker must give you the following information:

  • Proof that they are licensed under the FAIS Act;
  • Policy details: contact details of the insurer, exactly what is covered and excluded, amount of your premium, whether your premium increases automatically every year or not, how to claim; and
  • Inform you that if you pay your premiums late, you will still be insured as long as you pay the outstanding premiums within 15 days. If you pay after the 15th day, you will have no insurance cover.

If you apply through a call centre, ask for the transcript of your phone call for your records.

Make sure you give accurate information. If it’s not accurate, it is false information, even if you thought it was the correct information.

Make sure you play open cards. If you are not sure whether the insurer needs certain information, ask them. By keeping quiet, you also give inaccurate and false information.

After the application

Motor vehicle insurance is only valid if your vehicle is roadworthy. The responsibility rests on you to check your insured vehicle regularly to ensure that it stays roadworthy e.g. make sure there is enough tread on the tyres as required by law. Also, remember to contact your insurer at least once a year to reduce the insured value of your vehicle as motor vehicles’ value normally decline over time. By reducing the insured value, you will save on premiums and avoid being over-insured.

Household content insurance covers everything inside your house. House contents are normally insured at replacement value. As the price of furniture, clothing, etc.  increases over time, you need to contact your insurer periodically to adjust the replacement value of your home’s contents to prevent becoming under-insured.

Home owners insurance covers the physical structure (building) of your house. Property is normally insured at the rebuilding value of the structure. Take note that the rebuilding value of a property is usually lower than its market value. Any cost incurred to maintain the building’s structure is generally not covered by insurance. An insured property owner must do adequate maintenance on the property. If a property owner neglects to do the necessary maintenance and consequently suffers a loss,  he/she will not be able to claim from the insurer for damage suffered as a result of inadequate maintenance. As most properties’ rebuilding value increase over time, you need to contact your insurer from time to time to increase the insured value of your house.

All risks insurance covers movable items that are taken out of the house e.g. cell phones. Most policies have a claim limit up to which movable items don’t have to be specified in your insurance policy. Any claim for an item with a value above the limit will only be considered if the item was specified by informing your insurer about any identifiable details of the item which can help to identify that item e.g. the brand, colour or serial number.

To enjoy maximum protection under your short term insurance policy, you need to do three things. Firstly, pay your premiums on time. Secondly, maintain insured assets as agreed with the insurer. Lastly, periodically assess whether the insured value of assets covered by your insurance policy, is still reasonable. If there are material changes in the replacement value of any of these assets, instruct your insurer to adjust the insured value of such assets. If you do these three things, you can have the peace of mind that you have maximum protection under your short term insurance policy.

Reference List

Accessed on 18 September 2015:

  • SAIA Consumer Education Booklet written by Denis Beckitt

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

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Tax penalties: Understatement penalties in the Tax Administration Act

1 2 3 4 5 6
Item Behaviour Standard case If obstructive, or if it is a ‘repeat case’ Voluntary disclosure after notification of audit or investigation Voluntary disclosure before notification of audit or investigation
(i) ‘Substantial understatement’ 10% 20% 5% 0%
(ii) Reasonable care not taken in completing return 25% 50% 15% 0%
(iii) No reasonable grounds for ‘tax position’ taken 50% 75% 25% 0%
(iv) Gross negligence 100% 125% 50% 5%
(v) Intentional tax evasion 150% 200% 75% 10%

It is not clear how a taxpayer’s behaviour is to be classified for purposes of considering at which rate an understatement penalty is to be imposed, or if it is even possible that certain taxpayer behaviour may not even fall within the table to begin with.  Suffice it to say that in terms of section 102(2) of the Tax Administration Act, the burden of proving whether the facts on which SARS based the imposition of an understatement penalty is upon SARS.

In terms of section 222, the penalty may only be levied where an ‘understatement’ is present, being any prejudice to SARS or the fiscus as a result of:

  1. A default in rendering a return;
  2. An omission from a return;
  3. An incorrect statement in a return; or
  4. Where no return was required, the failure to pay the correct amount of tax.

To calculate the penalty levied, the applicable percentage in the above table is applied to the shortfall amount, being the tax effect in question for which the taxpayer is penalised.  For example, if an income tax deduction claimed by a taxpayer is disallowed by SARS which seeks to penalise the claiming of the deduction, the applicable penalty percentage is applied to the tax effect that the deduction would have had had it been allowed.

Taxpayers are enabled through section 224 to object against the imposition of an understatement penalty.  What is further noteworthy is that, in the event that a penalty is levied for a ‘substantial understatement’, the penalty must be remitted by SARS if the taxpayer was in possession of a positive tax opinion from an independent registered tax practitioner supporting its tax position.  It therefore makes sense, if only to mitigate against the levying of penalties, to obtain a tax opinion from a registered tax practitioner prior to entering into a transaction.

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

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Objecting to an assessment

One of the risks of not using a tax professional to attend to one’s tax affairs arises when SARS assesses an individual’s income tax return.  Quite often, a return submitted is assessed incorrectly, or on a basis in terms of which SARS is disputing certain submissions made by the taxpayer in filing his or her (or even a family trust or company’s) income tax return.

It is then important to have an experienced tax professional at your disposal who is aware of the specifically legislated and prescribed dispute resolution rules that are required to be followed in order to object to an assessment with which the taxpayer disagrees.  The benefit of using a tax professional becomes even more pronounced when considering that individuals without tax experience and knowledge very often do not understand correspondence issued by SARS (and which would be informing the taxpayer of an adverse assessment for example being issued), and further that they can check assessments issued to ensure that these have indeed been issued on the basis on which the relevant return has been filed.

Various requirements would exist for a valid objection to be lodged with SARS.  These include that the objection be lodged in the prescribed format and by using the correct form, and that the objection be lodged within 30 business days from the date of the assessment issued.

If a taxpayer is unsure of the basis on which SARS would have issued an assessment, he or she is further entitled to first request reasons from SARS for the assessment issued in order to allow them to consider whether lodging an objection would be necessary or not to dispute the assessment.  These reasons, if requested, must be clear enough to allow the taxpayer to understand why SARS would have issued an adverse assessment and to then be able to lodge an objection against the assessment in question if required.  A request for reasons too (as is the case for an objection) needs to be submitted to SARS within 30 business days from the date of the assessment, whereafter the objection must be lodged within 30 business days of these reasons being provided to the taxpayer (and which SARS is obliged to provide, if requested, within 45 business days from receipt of the request for reasons from the taxpayer).

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

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Salary sacrifice schemes – Latest judgment by supreme court of appeal

Salary sacrifice schemes are popular in practice.  Typically, they involve employers paying a decreased salary to their employees, with an added fringe benefit to make up for the lost ‘cost to company’ sacrificed by the employee to obtain the benefit.  For example, an employee may prefer to enter into a salary sacrifice with his/her employer in exchange for being allowed to use an employer provided motor vehicle or accommodation.

From both the employer and employee’s perspective, the income tax and PAYE consequences linked thereto are very often unchanged.  The decreased salary paid by the employer is deductible for income tax purposes as well as such expenditure incurred to provide the benefit to the employee, whilst the employee is subject to income tax on both the decreased cash amount received as a salary as well as the fringe benefit provided by the employer.  The employer is also liable to withhold PAYE as calculated on the total remuneration paid to the employee (which would include both the decreased salary amount as well as the fringe benefit provided).  (See the Seventh Schedule to the Income Tax Act, 58 of 1962.)

The salary sacrifice scheme of Anglo Platinum Management Services (Pty) Ltd recently came under scrutiny.  After having lost in the Tax Court, Anglo Platinum appealed to the Supreme Court of Appeal (Anglo Platinum Management Services (Pty) Ltd v CSARS [2015] ZASCA 180 (30/11/2015)).  In essence, the appeal involved a salary sacrifice scheme implemented by Anglo Platinum whereby it would purchase motor vehicles – selected by its employees – for use by its employees, in exchange for the employees agreeing to a salary sacrifice equal to the value of the benefit.  The vehicles would remain the property of Anglo Platinum until enough has been sacrificed by the respective employees to equate to the purchase amount of the vehicles plus interest calculated thereon.

During this period, Anglo Platinum withheld PAYE on both the salaries paid to its employees, as well as the value of the fringe benefit derived by the employees in using Anglo Platinum’s motor vehicles.  This is hardly contentious, and SARS did not dispute this treatment.  What was in dispute however was whether there really was a salary sacrifice, and whether PAYE should not also have been withheld on the sacrificed amount (and the employees therefore taxed on this amount too).  SARS argued that the scheme, although valid, was incorrectly implemented.  In essence, so the argument went, the employees were still receiving their full salaries, and amounts withheld from their salaries were in essence payments made to the employer to facilitate funding for the acquisition of the vehicles.  SARS cited two main indications in support of this, being that the employees were ostensibly responsible for insurance payments on the vehicles, and that notional accounts with payments, interest and related vehicle expenses were kept:  employees would be responsible to pay any shortfall amounts on these accounts, and similarly be entitled to access any credits available on excess amounts withheld.

The Supreme Court of Appeal upheld Anglo Platinum’s appeal, largely based on the evidence of Anglo Platinum’s Mr Broodryk who testified on behalf of the taxpayer and who devised and implemented the scheme.  It is clear that the court placed great emphasis on the implementation of the scheme to objectively consider whether the scheme in implementation reflected a true salary sacrifice by employees.

The legal matters in the case are not contentious.  At issue is the implementation which is what so often goes awry where tax related advice is concerned.  Our clients should take note of this:  it is not good enough to have a positive tax opinion as regards a proposed structure or transaction.  It is necessary, if not essential, to involve your tax experts in implementation too, be it in salary sacrifice matter, or any other transaction.  Had Anglo Platinum not heeded this principle, the judgment by the Supreme Court of Appeal may very well have gone in SARS’ favour.

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

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Requirements in order to complete your 2016 tax return

PERIOD : 1 MARCH 2015 TO 28 FEBRUARY 2016

The 2016 tax filing season opens on 1 July 2016.

Deadline dates for the submission of returns are as follows:

25 November 2016 Manual submissions for non-provisional taxpayers;
25 November 2016 E-filing submissions for non-provisional taxpayers;
27 January 2017 Compliant provisional taxpayers using e-filing.

If there is a possible shortfall on tax payments for the 2016 fiscal year on provisional tax, you will still be able to calculate your top-up payment in order to provide you with the option of settling your income tax liability “interest-free” on or before 30 September 2016.  You therefore need to submit your information as soon as possible to your tax consultant.

Your check list (where applicable):

  DOCUMENTATION DETAILS: YES | NO
1 Income – IRP5 or IT3(a) certificate  
2 Income from investments/Interest on loan accounts – IT3(b) certificate  
3 Local/foreign Capital Gain/Loss – IT3(c) certificate (including sale of property, shares in private companies, etc.  
4 Any other income – please provide details (e.g. inheritance received, etc.)  
5 Business income – full details of income and expenditure  
6 Lump sum income – IRP5 certificate  
7 Rental income – full details of income and expenditure including period let  
8 Medical contributions certificate and expenses – medical aid certificate and proof of “other expenses”  
9 Donations – S18A certificate reflecting proof of donation made  
10 Pension Fund or Retirement Annuity Fund contribution certificates – certificate reflecting proof of contribution paid  
11 Travelling allowance – make/model of motor vehicle, registration number, cost thereof and opening and closing km’s (kindly provide us with your compulsory logbook detailing split between business/ private mileage, destination, reason for travel).  Please detail any change in motor vehicles.  
12 Subsistence allowance – detail number of days spent away from home on business (local and international) and kindly include destination  
13 Changes to Assets and Liabilities including sale and purchase of fixed property.  

SARS requires you to ensure that all your personal details are correct (e.g. physical address, telephone numbers or e-mail address) as well as details of your banking account irrespective of whether you are entitled to a refund or not.

We wish to point out that your tax consultant cannot request documentation on your behalf from third parties (i.e. previous employers, insurance companies, banks, etc.) for confidentiality reasons.  It is therefore of the utmost importance that you provide them with all the necessary documentation and information to enable them to submit your tax return correctly and timeously.

Please note that SARS are confirming investment income information received from Financial Institutions with details recorded in the tax returns submitted.  Please ensure all investment income is supplied to them.

Please do not hesitate to contact us should you require any further information.

Director:  Jessica Southgate
Nwanda Financial Services (Pty) Ltd
tax@nwanda.co.za

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

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Nwanda Internal News (June 2016)

  1. Did you know this about a CA(SA) qualification :

A recent survey of the top 200 companies on the Johannesburg Stock Exchange (JSE) found that:

  • 74.8% of Chief Financial Officers (CFOs) of the JSE’s top 200 are CAs(SA)
  • 30.3% of Directorships are CAs(SA)
  • 28.1% of CEOs of the JSE top 40 are CAs(SA)
  • 98% of all RAAs (auditors registered with the IRBA) are CAs(SA)
  • JSE top 40 companies with CA(SA) CEOs financially outperform those not headed by CAs(SA)
  1. Awesome Reward goes to:
  • Merusha Yenketsamy – Excellent work performance under pressure
  • Rabia Sarwar – Completion of SAICA articles
  • Justine Li  – Fighting the brave SARS battle and securing a VAT refund for a client
  1. Farewell to staff members:

We bid farewell to the following staff members:

  • Nelisiwe Mahlangu
  • Jamie-Lee Pietens
  • Johan du Plessis
  • Brett Beetge

We wish them success in their future endeavours.

 

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Tax invoices

South Africa operates a VAT system whereby businesses (vendors) are allowed to deduct the VAT incurred on business expenses (input tax) from the VAT collected on the supplies made by the business (output tax). The most important document in such a system is the tax invoice. Without a proper tax invoice a business cannot deduct input tax on business expenses.

The VAT Act prescribes that a tax invoice must contain certain details about the taxable supply made by the business as well as the parties to the transaction. The VAT Act also prescribes the timeframe within which a tax invoice must be issued (i.e. 21 days from the time the supply was made).

A business is required to issue a full tax invoice when the price is more than R5 000 (referred to as consideration for the supply) and may issue an abridged tax invoice when the consideration for the supply is R 5 000 or less than R5 000. If the consideration for the supply is R50 or less, a tax invoice is not required. However, a document such as a till slip or sales docket indicating the VAT charged by the supplier will be required to verify the input tax deducted.

As from 8 January 2016, the following information must be reflected on a tax invoice for it to be considered valid:

  • Contains the words “Tax Invoice”, “VAT Invoice” or “Invoice”
  • Name, address and VAT registration number of the supplier
  • Name, address and where the recipient is a vendor, the recipient’s VAT registration number
  • Serial number and date of issue of invoice
  • Accurate description of goods and /or services (indicating where applicable that the goods are second hand goods)
  • Quantity or volume of goods or services supplied
  • Value of the supply, the amount of tax charged and the consideration of the supply (value and the tax)

To ensure that the Tax Invoice meets the SARS requirements, a checklist has been developed. To access the checklist, click here.

Source: SARS website

(http://www.sars.gov.za/ClientSegments/Businesses/Government/Pages/Tax-Invoices.aspx)

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

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