Today was the big day for our new (and former) Finance Minister, Pravin Gordhan. Trying to juggle rising debt, falling revenue, slow economic growth and imminent Municipal Elections didn’t make Budget 2016 an easy task. Minister Gordhan tried to steer the rather fragile ship and had no real surprises in Budget 2016. In fact the budget was more conservative than most expected.
As business owners, we hear about revenue targets and expenditure. We hear about sin taxes and decreasing deficits. What we don’t hear (not clearly anyway), is how this all affects the SME owner in South Africa. What does it mean to my business and how can I plan forward. As accountants for SME’s, we always try to make sense of all the technical stuff, so that the non-finance entrepreneur can understand.
We’ve summarised the top 7 points in Budget 2016 and how it will affect you and your small business:
1. There is a small change in personal taxes. If you earn less, you will pay less. If you earn more, you will pay more. The amounts are really small and won’t make too much of a difference. If you earn R10,000 p/m, you will save R20.25 p/m. If you earn R100,000 p/m, you will pay R155.50 per month more.
2. Tax for companies remained the same at 28% and VAT remained unchanged at 14%. If government was serious at avoiding a downgrade to junk status, raising the VAT percentage would have been the best move. But in an election year? Definitely not a smart move.
3. There is a VERY small change in the taxes for small businesses. Although Minister Gordhan emphasised repeatedly how important small businesses and entrepreneurs are for the country, there was no big change here – the first time in many years.
4. Transfer duty on property sales above R10m is to be raised from 11% to 13%, which in essence represents a form of wealth tax. This won’t really affect the business world as most companies this size buying commercial property would be VAT registered anyway (therefore Transfer Duty will not apply).
5. The maximum effective capital gains tax rate for individuals was raised from 13.7% to 16.4%, and for companies from 18.6% to 22.4%. Again another change that will most affect the rich.
6. The fuel levy is up by 30c/litre. Oil prices are at record lows (which should make fuel cheaper) but our Rand is also at record lows (increases the fuel price). The Rand also further weakened after the budget announcement (part because of the budget, part because Brazil was downgraded to junk) so we will most likely see this increase coming through in the petrol price.
7. And a fun one: if you’re running a canteen, your canned beverages might become more expensive as Government plans to introduce a sugar-sweetened beverages’ tax to help reduce excessive sugar intake.
Small businesses, entrepreneurs and youth employment were considered important but sadly no big proposals were made to significantly address growth in these areas.
Our final thoughts: It is going to be a tough year for our economy and businesses and we will most likely be downgraded to junk status.
What can you do? Grow your business by getting great systems in place and ensure efficiency. And on taxes? if you are a small business owner, make sure that you qualify as a small business corporation (tax rates are lower) and that you are claiming for Employment Tax Incentives (if you employ young people) and of course, get great accountants that can help you navigate your way in this challenging time.
Tax Deadlines in March
|7 March 2015||–||EMP201 return and payment|
|31 March 2015||–||VAT201 (02/2016) return and payment via SARS efiling|
What our clients are saying
In January 2016 we sent out surveys to all our clients. The average rating received: 9.1 out of 10. More than 70% of our clients completed the survey and we only had ONE rating below 8. Here are some of the nice things we heard:
– Absolutely amazing service. Efficient. Prompt response. Overall offering is perfect. – Corne Koekemoer
– Knowing that I have financial advise available at all times. – Leon Jooste
– The excellent & personalised service received from Anina. She is also very helpful and friendly. Always available to assist. I could not ask for more!! – Monty Olivier
– Love having a dedicated accountant to deal with. – Vincent Pfaci
– Prompt service. Patience with my level of accounting knowledge 🙂 Always great service. – Erik Kruger
– It took a few months to get into the new system. There were problems, which were immediately remedied and I am now totally confident that The Beancounter is familiar with and in control of my company. If I have any requests or queries, they are immediately acknowledged and dealt with. – Beryl Lutrin
– The positive attitude to our business, always available and willing to assist… they are a true business and not just accountants! – Brett Godfrey
We are so grateful to serve you and getting such amazing feedback makes everything worth while. All the best for the new financial year starting next week.