Putting your saved money to good use during a recession

On the 5th of March, South Africa confirmed its first coronavirus case and less than a month later, the country had already completed a full week under lockdown. In this month, consumer spending took a big knock as by the first few days of the lockdown, consumer spending fell to a low of 28% for the same period in 2019.

The drop in consumer spending came as the coronavirus pandemic closed entire sectors of the economy, caused widespread panic, and led to an increase in unemployment unlike the country had ever seen before. From these indicators, it is clear that consumer spending will stay unstable for quite some time. And since the start of the lockdown, consumer spending has remained low. At the start of May, the World Economic Forum predicted that for the first two weeks of the month, consumer spending would still decrease on all economic fronts apart from essential groceries and home entertainment.

Furthermore, estimates from the IMF in April’s World Economic Outlook projected South Africa’s GDP growth for 2020 to be -5.8%, with many other countries also showing a negative GDP projection. However, all attempts to predict what might happen to the economy by the end of the year will seem like wild guesses until the economy stabilises somewhat.

This worrisome GDP projection for South Africa followed on what was already a recession, as the last two quarters of 2019 showed negative growth. The continued recession means that consumer spending will be down for a long time. However, it does not necessarily mean that everyone is equally affected by the weak economy.

Those who have not been as adversely affected, are finding themselves in positions where previous expenses no longer exist. This means that some even find themselves saving money during the pandemic. This is not the norm, at least not in South Africa. Other countries, although showing similar trends in the decline of consumer spending, have put their saved money to good use. Households in the UK, for instance, have repaid a collective £7,4 billion in credit debt during the month of April.

It should be kept in mind, however, that consumer spending is only a reflection of the wider economy. It does not directly impact consumers as much as the factors that cause it. Yet for those who have been able to retain their jobs, salaries, and assets, it does mean fewer opportunities for spending and provides an opportunity to make good use of the money saved.

For instance, with repo rates being cut to aid the economy, it means that you save money with your monthly bond repayments to your bank over the same period. Even though it may be tempting to spend the money saved, it may very well be put to good use in continuing to repay the instalments as if no change occurred. In this way, you pay off your debts quicker in the long run.

Repo rate cuts are meant to lead to increased borrowing and to encourage consumer spending, which is especially necessary for the economy in a time such as the pandemic and helps keep the economy from crashing beyond reasonable repair. But if there is no need to borrow money or spend, it is better to hold on to the money saved. If you are working from home, the money you save from your daily commute could also make a big difference to your financial outlook in the long run. The same goes for money saved on entertainment and dining costs, leisure activities, and vacations. If you save money while the economy is struggling, it is best put to use by repaying debts with a variable interest rate.

If you have no debts that require attention, instead of spending the money saved on things that will depreciate in value, or ordering from Uber Eats every other day, it may be a lot better to invest in the long-term. This is because long-term investments will also pay a lot more dividends once the economy starts returning to normal levels of growth and interest rates inevitably go up again.  So even though the effects of COVID-19 have caused the economy to shrink, for those who are not directly impacted, it does present an opportunity for personal financial flourishing. Swimming upstream against consumer spending trends means that every cent saved is an investment to be made.

Reference list

  • https://www.bankservafrica.com/blog/post/what-our-data-tells-us-about-consumer-spend-during-the-coronavirus-era1
  • https://www.weforum.org/agenda/2020/05/coronavirus-covid19-consumers-shopping-goods-economics-industry
  • World Economic Outlook, IMF, April 2020

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 adviser for specific and detailed advice. Errors and omissions excepted (E&OE).

SARS eases burden on taxpayers, but there’s a catch

The tax season is swiftly approaching. For many people, it’s a time of the year that they dread. When it comes down to it, tax can become complicated mess that involves a lot of maths and calculations that just doesn’t come naturally to most. For those of us who don’t have PhDs in accounting or mathematics, crunching the numbers and factoring in a variety of different income sources can be tough.

In 2020, the tax season looks quite a bit different from previous years where taxpayers could start filing electronically in July. One of the main reasons for the delayed tax season is the emergence of COVID-19 and the desire to keep as many people as possible from having to submit a tax-return in person, which means that SARS has taken measures to increase electronic means of filing tax-returns. This year, the tax filing season starts on the 1st of September and ends on the 31st of October (for those filing manually in-branch) or the 16th of November (for those using e-filing).

Because of the often-complicated nature of tax, there are a few measures that SARS takes to ease the burden on tax-payers, although some of these measures are not necessarily accurate or act in the best interest of the taxpayer.

This year, for instance, SARS is sending out a large number of auto-assessments, where they assess your tax-data for you and give you the simple option of accepting their assessment or going ahead and filing your tax-return as usual. Notifications of auto-assessments will be sent via SMS, and individuals can then use eFiling or SARS MobiApp to view, edit, or accept the proposed assessment.

For these auto-assessments, SARS only base their evaluation on the data that they have received. This means that if there are outstanding tax certificates or third-party data related to your taxable income, you need to make sure to get all your documents in order as incorrectly reported or undeclared income could make you liable to penalties and interest on outstanding tax amounts. If this is the case you will need to submit your tax-return as per usual.

Conversely, if the assessment does not take into account outstanding documents or other factors that preclude some of your income from being taxable, you should not accept the auto-assessment as you will be losing out. The bottom line here is that before you accept SARS’s auto-assessment you need to make sure the assessment reflects any and all of the aspects that have an impact on your taxable income.

Another measure comes in the form of Pay-As-You-Earn (PAYE), which is the monthly amount that your employer pays as a tax deduction on your behalf, based on your income-tax bracket. It’s nice because it means that you as an individual are covered for the most common tax that comes from earning a salary. The not-so-nice thing about PAYE is that it is a crude calculation and does not factor in the parts of your income that are not taxable, or the different parts of your income that are subject to different tax-levels.

For this reason, some young employed people, earning from only one stream of monthly income are exempt from submitting a tax return, but are losing out in actuality. Most of the time this option will not work in their best interest as they will be freely giving tax on non-taxable income to SARS.

For other taxpaying individuals, they will need to take into account a variety of income streams (including taxable interest, rental income, capital gains, medical aid schemes, retirement annuities, allowances, tax-deductible donations, to name but a few). If you are subject to many of these tax-variables, doing your own tax-return becomes a hassle.

While you could go ahead and piece together the puzzle of your annual individual tax-return on your own, it is advisable to make use of a registered tax practitioner. A tax practitioner will be able to do the complex calculations on your behalf so that you come out of the tax season with your sanity intact. This means you’ll likely have more money in your pocket than if you had blindly accepted an auto-assessment or neglected certain aspects of your tax-calculations.



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 adviser for specific and detailed advice. Errors and omissions excepted (E&OE).

Do tenants still have to pay rent during the lockdown?

Common Law position – in absence of a “force majeure” clause

A force majeure is an act of God or man (such as a war, strike, riot, crime, plague, or an event described such as a hurricane, flood, earthquake, volcanic eruption, etc.),  that is unforeseeable, out of the reasonable control of the parties to a contract and which makes it objectively impossible for one or both of the parties to perform their obligations under the contract.

In the absence of such a clause, or if the clause doesn’t specify the unforeseen event(s) on which the parties can reply, then the parties may be able to rely on the common law principle of “supervening impossibility of performance” to suspend their obligations under the contract, provided that it has become objectively impossible for them to perform under the contract as a result of an unforeseeable and unavoidable event(s). For the doctrine to be enforceable, the following applies:

  • The impossibility must occur after the conclusion of the contract.
  • These events must be unavoidable and make proper performance of the contract impossible and must not merely make performance more burdensome or economically onerous.
  • If performance becomes objectively or absolutely impossible, the contractual obligation is extinguished and the duty to perform and the corresponding right to claim performance falls away.
  • Objective impossibility includes instances of actual physical impossibility and also where performance remains physically possible but cannot reasonably be expected to be performed.
  • Both parties’ obligation to perform the contract will be extinguished.
  • If the event causing the impossibility was foreseen or foreseeable and could have been avoided, then the parties cannot rely on this doctrine to not perform their obligations.
  • Once the force majeure event has come to an end and performance has become possible again, the contract will continue.
  • The creditor will have the option to terminate the contract if the interruption is likely to endure for an unreasonably long time.

In applying the doctrine of supervening impossibility, the SCA in Transnet Ltd t/a National Ports Authority v Owner of MV Snow Crystal [2008] held that in order to determine whether the doctrine applies, it is necessary to consider factors such as the nature of the contract, the relationship of the parties, the circumstances of the case and the nature of the impossibility. Accordingly, any analysis of whether a party would be able to rely on the defence of supervening impossibility in respect of its inability to perform its obligations in terms of an agreement due to the COVID-19 virus outbreak must take into account all of the surrounding circumstances of a case.

Contractual position – force majeure clauses

The principal objective of such a clause is to relax obligations and to set a limit to the strict liability imposed on a party to perform in terms of a contract, in the event of certain circumstances arising, which prevent or have an effect on the party’s ability to perform.

Parties often include time periods during which the contract will be suspended if a force majeure event occurs. This gives any party the right to elect to terminate the agreement unilaterally by way of notice to the other party should the force majeure event continue for longer than the set period. This period will depend on the agreement between the parties and the nature of the obligation, the contractual performance and the practicality of allowing for such a suspension.

Both parties will be excused from performing, because the impossibility of performance, due to an event beyond the control and foreseeable expectation of the parties, causes their intention of performing an agreement to be extinguished, and frustrates the purpose of their agreement.

If existing contracts have force majeure clauses in them, then one may be able to rely on these clauses, instead of the common law principle of “supervening impossibility of performance” to suspend one’s obligations under a particular contract if performance of that contract becomes impossible as a result of an uncontrollable event. However, if force majeure clauses are vague and incomprehensive, their interpretation could be problematic, as presumptions of interpretation are applied in our law to determine the meaning of words that are unclear.

In the case of Sucden Middle-East v Yagci Denizcilik ve Ticaret Ltd Sirketi (The ‘Muammer Yagci’) – [2020] 1 lloyd’s rep. 107, the UK court noted that the phrase “force majeure” is simply a phrase to label a list that includes a mixture of matters. The list informs the meaning of the phrase and not the other way around. The South African courts would likely follow the same approach. The parties cannot simply rely on a clause that is labelled as a “force majeure” clause or contains those words but does not list or elaborate on what the parties agree a force majeure to be. Force majeure clauses must be detailed and specifically list the force majeure events that the parties agree will suspend their performance of the contract (such as an epidemic). In this regard, parties should specifically list broad catch-all wording to contracts such as “act of God” or “acts of authorities” that they can rely on to encompass events they may not reasonably have foreseen.

Reference List:

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 adviser for specific and detailed advice. Errors and omissions excepted (E&OE).

Timeframe for the export of goods during the Covid-19 pandemic

Interpretation Note 30 (“IN 30”) by the South African Revenue Service (“SARS”) explains the requirements that need to be adhered to and prescribes the documentary proof, acceptable to the Commissioner, that must be obtained and retained by a vendor in order to levy value-added tax (“VAT”) at zero rate on a supply of movable goods, where those goods are consigned or delivered to a recipient at an address in an export country. Should these requirements not be adhered to, exports could potentially be accounted for at the standard VAT rate of 15%, which will result in adverse tax (and commercial) consequences for vendors.

Binding General Ruling 52 (“the BGR”) extends the periods to export movables, apply for a VAT refund and obtain relevant documentary proof of export as per the Export Regulations and IN 30.

The default position

The Export Regulations and IN 30 prescribe specific periods for exportation of goods, applications for VAT refunds and obtaining the relevant documentary proof of export for the process. The Export Regulations and IN 30 allow for an extension of the periods where they cannot be met due to circumstances beyond the control of the vendor. These circumstances include, amongst others, natural or human-made disasters and serious illness of a vendor, a qualifying purchaser, or a person duly authorised to represent these parties.

In light of the global Covid-19 pandemic, many vendors will have difficulty in meeting the timeframes as required. This is a situation that is considered to be beyond the control of the vendor, or qualifying purchaser or duly authorised representative as per the Export Regulations and IN 30.


The BGR only applies to supplies of movable goods in respect of which the original timeframes in the Export Regulations and IN 30 have not been exceeded and prescribe for extended periods as follows:

  • Indirect exports

The time periods prescribed under regulation 3(a) of the Export Regulations have been extended by an additional three months.

The time period to apply for a refund as prescribed in regulation 3 of the Export Regulations is extended by 6 months from the date of export.

  • Direct exports

The time period to export movable goods is extended by an additional 3 months.

Period for which ruling is valid

The ruling applies from the date of issue on 26 March 2020, and is valid until it is withdrawn, amended or the relevant legislation is amended.

If the BGR does not provide for a specific scenario in respect of exporting movable goods, vendors or qualifying purchasers may apply for a VAT ruling.

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)

How to claim your home office as a tax-deductible expense

As the old adage goes, change is as good as a holiday. But the way that the novel coronavirus has shaken up the world we live in, has, to the contrary, been extremely disruptive and stress-inducing. For many people, the disruption has come in the form of shifting from the traditional office space to working from home.

People who had been working flexi-hours or may have been self-employed and working from a home office might be very familiar with claiming business-related expenses from their personal income tax as a tax-deductible expense. For the everyday worker, though, the shift to working from home may incur costs that would not have been necessary had they been able to safely work from their traditional office. If the COVID-19 pandemic has meant that you need to work from home, you may be able to claim some of your business expenses back when submitting your next tax return.

What then are the prerequisites for filing a tax return that includes your home office expenses as a tax-deductible expense?

  • You need to have an agreement with your employer that allows you to work from home. Especially since working from home has been necessitated during the pandemic, some of these agreements may have been assumed without due communication. To cover your bases, have the agreement made in writing.
  • You need to spend at least 50% of your working hours working from your home office. Since the tax year runs from the start of March through to the end of February the following year, it means that 50% of your time spent working in the tax year must be from your home office. Generally speaking, the necessitated use of the home for work purposes during the COVID-19 pandemic makes this somewhat tricky because it would require you to work 6 months of the tax year in the home office if you were to make a full return to your business office’s premises later (based on maintaining the same hours). For instance, working 3 months from home and 9 from the office will disqualify you from claiming your home-office as a tax-deductible expense, as you would only have spent about 25% of your working hours from your home office.
  • Home office expenses are only tax-deductible if you have an area set aside exclusively for work purposes. Hammering away at your keyboard from your living room sofa, unfortunately, does not qualify you for a home office tax deduction. Makeshift offices or rooms that have a purpose apart from dedicated work do not qualify.
  • Additionally, your home office specifically has to be fitted out for the purpose of your work. If there are specific tools or equipment that your work requires, your home office has to be set up with these readily available.

What can you deduct as a business expense?

For anyone who earns more than 50% of their income from a traditional salary, pro-rated tax deductions can be made as it relates to interest on your home loan or rent, as well as the repair and maintenance of your home. That is to say that the tax-deduction is directly related to the portion of your property that is dedicated as a home office and is calculated as a percentage of the whole.

For anyone who earns more than 50% of their income from commission (or income other than that which is earned from a salary) can claim for the same expenses as mentioned above, but can also claim business-related expenses from commission-based activity.

What if you don’t qualify for a tax return on business expenses?

For those who do not qualify for a tax deduction on their home office space, it shouldn’t necessarily mean that you need to take on all of the burdens of your business-related expenses yourself. Where previously you could rely on company internet, for instance, now you would need to use more data per month and incur an additional cost.

The best solution in this regard would be to see if an agreement can be made with your employer to carry some of the costs by reimbursing you for the personal loss suffered. If done amicably, it could only serve to strengthen the relationship with your employer.
While the change brought about from the COVID-19 virus may not be as good as a holiday, it may well be able to pay for one once you are recompensed for your tax-deductible expenses.

Reference list

  • https://www.thesait.org.za/news/460951/Deducting-your-home-office-expenditure.htm
  • https://www.businessinsider.co.za/how-to-claim-the-cost-of-setting-up-a-home-office-against-tax-in-south-africa-2020-5
  • https://www.news24.com/fin24/money/tax/lesser-known-tax-incentives-20180524

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)