In these tough economic times, there are still ways to use SARS to work for you. A retirement annuity and a tax-free savings plan are not only great ways to make retirement provision, but also effective ways to reduce your tax obligations, whether it be in contributions, or the earnings in your investments.

In 2016 the tax treatment for contributions to retirement fund products (RAs, pension and, provident funds) was simplified to offer all individuals the same combined benefit of making contributions towards retirement funding. Investors can currently deduct contributions of up to 27.5% of the bigger of their taxable income or remuneration for income tax purposes. This amount is limited to an annual overall maximum of R350 000. Taking advantage of this benefit annually can significantly reduce an individual’s income tax liability.

RAs are not the only measures by the government aimed at encouraging savings in South Africa. In 2015 Tax Free Savings Accounts (TFSA) were introduced, offering much the same tax benefits as RAs on all funds invested. In short, no tax is payable on the funds invested in these two products. Income from investment funds includes interest, dividends, rental income, and capital gains, both locally and internationally. Currently, investors may contribute a maximum of R36 000 per year into a TFSA, with a lifetime limit of R500 000. Please note that you should NOT contribute more than the maximum specified as this will have dire tax consequences. The R36 000 represents all your TFSA contributions in a tax year, and not contributions per product you may have with various providers.

So let’s look at some of the features and benefits of these two products:

Retirement Annuity (RA)

• Tax-deductible contributions as mentioned above
• Tax-friendly investment returns as mentioned above
• Flexible investment fund choices across all major asset classes and fund managers
• Portfolio construction to meet personal investment goals and risk appetites
• Transparent investment products offering competitive fees and flexibility
• Protection from creditors
• Excluded from estate duty
• Various options available at retirement (bearing in mind limited access to lump sum amounts and normal income tax on pension payments)

Tax-Free Savings Account (TFSA)

• Tax-friendly investment returns as mentioned above
• Flexible investment fund choices across all major asset classes and fund managers
• Portfolio construction to meet personal investment goals and risk appetites
• Transparent investment products offering competitive fees and flexibility
• Tax-free ad-hoc and regular withdrawals
• Complete tax-free liquidity at retirement

The time to invest is now! Most product providers request that any additional contributions or new investments reach them by 22 February to finalise investments before 28 February. Contributions may not be backdated to fall in a previous tax year.

Speak to your financial advisor, or contact Origin Financial Wealth at 086 118 7878 for assistance. Don’t delay, and make sure you “bridge the gap” in your retirement and tax planning this year.

Tax risk insurance is simply the most effective protection for you and your business

If you are ever selected for an audit by SARS.

When you are covered by a tax risk insurance policy, your tax audit problem becomes ours, immediately. Critically for you, the cost of employing top tax specialists to defend your case are covered by us from the word go!

Tax Risk Insurance provide cover in the following matters:

Income tax audits
VAT
Employees tax audits
Capital gains tax audits
Dispute resolutions hearings and appeals to the Tax Board and the Tax Court.

WHY ARE TAXPAYERS AT RISK?

Tax audits are part of the SARS mandate, to ensure compliance and to maximise tax collections. SARS reported that it exceeded its audit coverage targets last year, conducting more than 1.8 million tax audits. This is the unnerving reality – SARS are now auditing more taxpayers more often, and statistically, you could be next.

SO HOW DO I GET SELECTED FOR AUDIT?

Even if you believe, like most people, that your taxes are up to date and accurate, SARS can still select you for an audit. Some audits are completely random. In other cases, SARS may put a case forward that you’ve underpaid your taxes, or a human error may have been discovered. The reality is that even if you employ the best accountants in the world, you may still get selected for audit.

The fact is, any SARS audit is ALWAYS best handled by qualified experts in their field.

For a very affordable monthly premium, a Tax Risk Insurance policy will pay for a team of experts to fight your case and ensure you receive a fair outcome.

Get the peace of mind we can offer you with tax risk insurance.

Speak to your Short-Term Advisor a

Please do the following to ensure that all emails are flagged as trusted emails:

• Check your junk mail folders. If the Origin Financial or relevant Insurer email is there, please reclassify the email by going to the junk email options and adding it to the ‘safe senders’ list.
• Ask your internet service provider to whitelist the Origin Financial or relevant Insurer address as a trusted email address.
• Ask your organisation to update its email policy to allow Origin Financial or relevant Insurer emails to be received.

This article is a general information sheet and should not be used or relied on as legal or other 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).

We are excited to inform you that we have merged with the DLR Financial Group — a successful professional financial services provider in their own right. This newly combined business will, therefore, be one of the leading independent financial services providers in South Africa.

The merger of our groups has enhanced our value proposition, enabling us to design the solution for our clients, by offering an expanded suite of services.

At the Origin Group, we are committed to you. We listen before giving advice and provide a holistic, customised solution that will fit each individual client.

A holistic view of our client’s financial position is required. The merger of our groups has enhanced our value proposition, enabling us to design a unique solution for our clients by offering an expanded suite of services.

Origin Group is now in a unique position to provide hindsight (compliance services), insight (performance-oriented services), and foresight (strategic services). This sets the stage for innovation and game-changing performance for our clients.

Our aim is to build Origin Group into a well-respected and diversified organisation that is recognised for creating value. Origin is committed to providing a valuable service while addressing the challenges of creating, managing, and maintaining wealth. Wealth is always linked to accounting records, the administration of ownership structures, family constitutions, and maximising our asset values.

Our approach is to constantly assist our clients by improving our level of service to ultimately achieve our goal: living excellence, respected for creating value.

We have acquired years of expertise to ensure that the family and all their business structures can benefit from what we offer.

This article is a general information sheet and should not be used or relied on as legal or other 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).

Summary of proposals and plans

Minister Mboweni delivered his budget speech yesterday and our view in summary is that this budget surprised with no material tax increases, apart from the normal increases, but that it is also quite “over”-positive in it’s outlook with regard to saving on expenditure and how the country is going to afford the deficits projected for the medium term going forward.

All the detail with regard to the budget is summarised in two documents, for which links are provided at the bottom of this advisory.

Tax proposals

Bracket creeping is addressed by increasing the levels where certain tax percentages kick in and this decrease in tax revenues (of about R2.2 billion) are recovered by increasing excise duties on tobacco and alcohol and a new export tax on scrap metal.

It was announced that the corporate tax rate will be reduced from 28% to 27%, but this is only for tax years starting from 1 April 2022, in other words from the 2024 tax year for most businesses. In the 2020 budget it was announced that there will be new measures to curb claiming of tax assessed losses and restrict the deduction of interest paid, which was postponed due to the Covid pandemic, but will now come into effect from 1 March 2022, which will affect many businesses, especially after the Covid pandemic’s effect on profits.

Other measures announced are the cancellation of the section 12J tax advantages, on 30 June 2021, a new Special Tax Unit investigating High Net Worth Individuals, more specific focus by SARS on collecting taxes and enforcing compliance, which we are already experiencing, as well as several other measures to address technical compliance and reduce tax losses in the current Income Tax Act.

Deficits and spending

Treasury projects the deficit for the next few fiscal years to be R690 billion (2021), R 500 billion (2022), R414 billion (2023) and R 378 billion (2024). These deficits will mainly be financed by further debt with interest payments (without capital repayments) budgeted for the 2022 fiscal year as R 278 billion and interest payments projected as 20.9% of gross tax revenue in the medium term.

One expert commentator referred to the “lost years” from 2009 to 2019, with specific focus on the economy and he is projecting another “lost decade” until 2030 due to these deficits and our current experience of how the government handles the economy.

Many, if not most, of the commentators are increasingly worried about how the RSA economy will be able to handle the debt situation, as well as how the government will deliver on their promises to reduce public wages and other costs.

There are also positive aspects. There are specific allocations for the funding of vaccinations, with the fastest growing functions being economic and community development and public services.

We do feel therefore that treasury handled the economic situation well in this budget by not raising taxes and therefore burdening business even more, but we are unsure about how treasury and RSA in total are going to afford the deficits projected.

Pieter Esterhuizen, CA(SA) TEP RA
CFO of Origin Group of Companies

This article is a general information sheet and should not be used or relied on as legal or other 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).

Your professional advisor can assist you to do this planning in the best legal way possible, especially if your professional advisor takes everything into account with a holistic approach to your entire family structure.

While February may seem to be too late for some changes, a lot can still be done, we still have about 2 weeks left, remember your provisional taxes can still be reduced!

The type of planning you should be thinking about and can still work on, as soon as possible, are the following, but there may be many more in your specific circumstances:

1. Personal tax: Annuities:

You can top up your current annuity or buy a new annuity at any time, even on the 28th of February! The allowable deduction for individuals is 27.5% of taxable income, most people do not use this allowance to the full and if you have cash available it is most of the time a good idea to do this before the tax year-end. You effectively receive 45% of the top-up amount immediately from SARS, because you would have to pay provisional tax on the 28th of February. Speak to your professional advisor now, to ensure this is the correct thing for you to do.

2. Personal tax: Tax free savings:

If you have not used your full annual R 36 000 to invest in tax free savings (per individual in your family), you should do this. The advantage of being able to save without any taxes on that investment is still the best investment you can make, even though it is limited to such a small amount.

3. Company tax:

a. Alternative risk transfer:
You can reduce your taxable income by buying a self-insurance short term insurance policy, with the full premium deductible in this tax year still, even if done on year-end. After year-end you can then decide how to use this policy to cover your assets, reduce your losses in subsequent years etc. Speak to a professional advisor that is really knowledgeable about this product.

b. Management bonuses:
Where a company needs to reduce their taxable income by for instance additional/final bonuses for management, these decisions must be taken by the board of directors by year-end, even if these amounts may be finally quantified after year-end. This process may be a bit more complicated, but your professional advisor will be able to advise you on how to approach this.

c. Stock and debtors:
Remember to write off old/obsolete stock and non-recoverable debts and provide for doubtful debts.

d. Final expenses and provision for creditors:
Remember to ensure to pay those expenses which you in any case have to do and can still be attributed to the current tax year and where those expenses are going to be paid after year-end to accrue for that.

e. Small business corporations:
Where your company qualifies as a small business corporation, you have additional tax benefits to normal companies (if you are in manufacturing even better), like assets being able to be written off more quickly, 50% in the first year as example. If you therefore are going to need some specific assets in the next few months, it may be a good idea to buy (or contract to buy) those assets before year-end.

f. Farming:
Bona fide farmers, whether in companies, trusts or as individuals have a variety of additional opportunities for tax planning (all of the above can be utilised as well), which should ensure that minimal tax is paid. Contact your professional advisor for more information.

4. Trust tax: Distributions:

Please remember that the trustees of your trust must make the decision to distribute taxable income or capital gains before year-end, SARS specifically checks this. The trustees can for instance decide to distribute to whom and in what percentages, even though the trustees may only later decide the exact amounts.

5. Group structures: Reorganisations:

Although a group restructuring may be more complicated and the time left may not be enough, plans can still be made, and in the correct circumstances, your assets can still be moved to a company owned by a trust and your estate duty reduced, as an example or one or more of your group companies can be combined. All this can be done without tax consequences, if done in the correct way, but you will need a professional advisor that knows these types of transactions to do this quickly and effectively.

As you can see from the above there are still a lot of plans that can be made, even now 2 weeks before tax year-end. Our group employs a variety of tax planners and experts that can be of assistance to you with regard to the information set out above and to assist you in other planning that may be more relevant to your situation. Please remember that no solution is applicable to everyone, each client should be consulted on his specific situation. That is why we deliver out holistic services, taking every individual client’s situation into consideration.

Pieter Esterhuizen, CA(SA) TEP RA
15 February 2021
Origin Group of Companies

Please contact our Business Development executive for more information:

Cobus Coetzee: 082 4533305
cobus.coetzee@dlradvice.com
Executive: Business Development
Origin Group of Companies

This article is a general information sheet and should not be used or relied on as legal or other 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).

2020 was an immensely difficult year. Because of the economic downturn in the country, it left a lot of businesses with insurmountable odds to make things work and so, many businesses have had to shut up shop. While this has been unfortunate for many business owners, it does present those who have been able to continue their business successfully with new opportunities and new questions to ask themselves.

Not least of these is knowing whether your business is scalable (even after a torrid economic year). In fact, scalability is often made possible because of economic downturn. Despite the disaster of 2020, it does look as though the economy will grow by quite a margin in 2021 (as is normal after a recession). There is no doubt that business will pick up and that businesses that have fallen away as a result of the pandemic have opened up space in the market, leaving clients ready to be picked up.

Here are some things to think about as you consider growing your business in 2021:

1. You should only scale once you are ready. 

Scaling a business is an endeavour that should never be taken lightly, but should come as a result of good deliberation and forethought. That is to say that scaling for scaling’s sake is a risk that endangers all stakeholders in the business. Make sure that it is something you want to do and are ready for before taking the plunge.

2. Having to reject business opportunities for lack of capacity is a good sign for scaling.

The more opportunities you have to turn down shows that there is room for expanding your business in some way or another. You will have to evaluate what kind of opportunities it is that you are turning down – even if these are outside of the regular scope of your business. Is it perhaps an opportunity to bring in someone with greater superiority and experience in a related business activity? Is it time to increase the workforce with just one or two people to fill the gap? Are the opportunities you are turning down due to seasonal demand?

Note that there are many reasons why you might need to turn down an opportunity, but getting down to the root of the cause is the only way to determine what your next step should be (dissecting your finances is one way to assess your situation before you decide to proceed or not).

3. Good cashflow and budgeting can help you release funds to grow.

If you’re finding that your cashflow is strong but you are perhaps are unsure what to do next to take your business to the next level, a strategic financial review may do wonders to show you where you are over- and underspending. As soon as you are aware of the areas of your business where you can reasonably focus more attention (whether that is in infrastructure, staffing, product/service development, or somewhere else), you will be able give your energy to those aspects that lead to business growth. In order to make the most of this step, it is will be of great value to speak to your financial advisor.

4. Do some market research to search out lost/returning customers.

One important consideration in and after a recession is that while there may be businesses that have closed, their customers will need to go somewhere to have their needs/wants met. This means that there is great value in rounding up the customers and clients who are looking for someone else to fill a gap that was created. Take time to find out who your target market is and how to reach them. Also, don’t be afraid to broaden your horizons: if the COVID-19 pandemic has proved anything, it is that new trends can form very quickly as people reprioritise their lives. The faster you move to engage with the lost consumers and clients, the more opportunity beckons your business’s growth.

5. Infrastructure is everything.

If you do not have the necessary infrastructure in place (or if you cannot reasonably expand your infrastructure to increase your capacity), scaling can be extremely difficult, if not impossible. If you have assessed your available assets and resources and deem it to be a good foundation on which to expand your business, you may just have what it takes to increase your revenue by accessing a larger part of the market share in your industry.

Are you ready to assess your business and take the necessary steps to grow and take advantage of the gaps created due to the COVID-19 pandemic? If you do, the world may just be your oyster.

References:

• https://articles.bplans.com/five-signs-that-its-time-to-scale-up-your-business/
• https://www.entrepreneur.com/article/347323

This article is a general information sheet and should not be used or relied on as legal or other 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).

We all need a break at some point. Why not take a tax break to start off 2021? The end of the tax year, 28 February 2021, is fast approaching and we urge you to contact your Origin financial planner, adviser, or tax consultant at your earliest convenience in order to arrange the correct structuring in your portfolio to qualify for an additional tax deduction in time. 

The Origin group offers the following tax saving advice and products to help you maximise the tax benefits offered through investments, risk management products and legislation: 

INDIVIDUAL AND GROUP RETIREMENT ANNUITIES & PENSION FUNDS 

Contributions to pension, provident or retirement annuity funds are tax deductible up to 27.5% of one’s gross remuneration or taxable income (whichever is higher), subject to an annual maximum of R350 000. 

Additional advantages of retirement funds include: 

• Tax free growth in your investment. 
• Favourable tax treatment on lump sum proceeds at retirement or death. (The first R500 000 is tax free, while the rest is taxed at favourable rates) 
• Retirement funds are protected against creditors and, as a result, insolvency. 
• Withdrawals from other retirement funds, such as employer funds after resignation, can be transferred to retirement annuities free of tax. 

• Retirement funds are exempt from estate duties and do not form part of your estate, providing you with savings on executors’ fees as well. 
• It provides a monthly income in retirement with various options available.  
• Group Retirement Annuities can form part of your employee benefits, with one benefit being that of a reduction in taxable income. 
• Origin offers a range of actively managed model portfolios and fund choices to enhance communication from fund performances, optimise market opportunities, and keep costs as low as possible for our clients. 

TAX FREE SAVINGS 

With a tax-free investment, you do not receive immediate income tax relief, but your fund will grow, free of tax, while you remain within the tax-free savings product. Every year, you can invest up to R36 000 in tax free savings accounts, with a lifetime limit of R500 000. When you do make a withdrawal, or at maturity, you will not be taxed on the proceeds either. A variety of funds are available to be invested into, and can be structured according to your specific need, risk, and time of investment. 

STRUCTURED INSURANCE 

Through Santam Structured Insurance, we offer business owners a unique way of insuring their assets, where they can create and increase their insurance capacity over a period and retain more risks or higher deductibles than through a standard business short term insurance policy. 

Here are a few benefits of what specialised structured insurance can offer: 

• Additional risk cover. 

• Improvement of cash flow benefits. 
• The creation of self-insurance capacity for uninsurable or expensive risks. 
• Lump sum or monthly contributions are accepted. These are short term insurance premiums and deductible for income tax purposes.  
• It can be structured as a stand-alone and as a supplement to your traditional short term insurance benefits. 

TAX RISK POLICY 

Have you or your business been selected for an audit by SARS? If so, additional accounting and fees towards tax specialists can often become unaffordable. Origin offers a tax risk policy to look after these unforeseen additional accounting fees or appoint a team of tax professionals who will defend you. The cover can provide for Income tax audits, VAT, Employees tax, CGT and other dispute resolution hearings and appeals to the Tax Board and Court.  

To ensure you do not miss out on any of the tax saving opportunities for 2021, contact our team of financial advisors by latest middle February in order to add an appropriate lump sum contribution to your Structured Insurance product, tax free savings account or Retirement Fund. Your financial planner can calculate the correct contribution to maximise your tax deduction for the tax year. With little time left to make the most thereof, do not let the opportunity pass you by. 

This article is a general information sheet and should not be used or relied on as legal or other 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).

How do I begin wrapping up a year that felt like a century? Never would we have thought that this year would bring a pandemic and lead to the challenges that ensued. It wasn’t all bad, though. The year was filled with change: we set ambitious goals to maximise our productivity, we encouraged innovation, and as always, we gave our all to provide quality “COMMITTED TO YOU” service to you, our clients. The year also proved your resilience when faced with adversity.  

Once again, thank you for your loyal support and encouragement throughout this economically difficult period each and every one of us have had to face.  

As the final weeks of 2020 approach and we prepare for the New Year, the holiday energy surges through us as we anticipate the opportunities that lie ahead with renewed excitement. Our team at Origin Financial and MST wishes you and your loved ones a joyous and blessed Festive Season.  

For those who are travelling, please travel safe, and for those just taking a break, please take care. 

Last, but not least, wear your masks, wash your hands, sanitise surfaces regularly and practice social distancing – let’s keep each other safe. 

We look forward to working with you in 2021. 

Always COMMITTED TO YOU! 

Leon Swart 

Group CEO  

Office closing times 2020: 

24 December — 13:00
28-30 December — 16:00  

31 December — 13:00 

From 2 January 2021, office hours will continue as normal.
Take note: Our Health and Wealth Department will be closed from 24 December 2020 – 4 January 2021. 

When to start with estate planning?

At the age of 18 a young man or woman officially becomes an adult in the eyes of the world. This means that you are entitled to make important financial, legal or health decisions about your life. But what if something happens and you are unable to make these decisions at a critical time? Such situations can range from a small inconvenience to a life-threatening crisis, but if your estate is in order, it can speak on your behalf. Consider the following:

1.Financial power of attorney

A financial power of attorney allows you to appoint someone you trust, like another family member, to make financial decisions on your behalf. This document can be activated when you are incapacitated or right after it has been signed, and it will remain effective until you can resume charge of your own decisions again.

A financial power of attorney will allow the appointed person to handle important legal and financial matters on behalf of the grantor. In the case of a business or financial situation which involves the young adult, such as a passport or car registration renewal, it is convenient for the power of attorney to act on his/her behalf if they cannot tend to the problem. This arrangement may come in very handy when there is a legal situation which requires quick action and the young adult is unable to attend. Families with a disabled family member can also benefit from the security of a power of attorney.

2.Living will

A living will enables you to state specific medical wishes if you are alive, but unable to communicate them. Artificial life support in the case of a coma or terminal illness is an issue often discussed in such a document. Preferences regarding administering of pain medication, artificial nutrition and other treatments can be dictated in this document.

3.Health care power of attorney

With this type of power of attorney, you give someone else the power to make health decisions on your behalf. These decisions, regarding serious health and emotional problems, will be made based on instructions which you have given to your power of attorney beforehand. Sometimes a living will is combined with a health care power of attorney, because both of these can be revoked, i.e. it can be cancelled at any time by destroying it, communicating your wishes to your doctor, writing a letter regarding the cancellation or by creating a new living will and health care power of attorney, indicating that the new will revokes all the previous ones.

Start the conversation

Every family’s legal needs are different, so perhaps you should take the first step in being prepared for the worst. Remember that every time your family changes, such as when a child is born, you need to adapt your will to include them. Start the process and be prepared.

This article is a general information sheet and should not be used or relied on as legal or other 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).