It is always a good idea to do thorough planning to minimise your tax legally and it is never too late, especially in February.
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.
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
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).