How to get tax savvy to save your business money

tax savvy to save your business

When business owners consult experts to improve their organisation’s bottom line, they’re often advised to cut costs and save as much as possible; but this is no simple task for any business. However, there is one method that offers guaranteed savings, even during lean times, and that is to maximise the company’s tax management.

Gary Epstein, MD of EasyBiz Technologies, outlines the importance of getting tax savvy and how it can impact the success of a business.

According to South Africa’s tax-collecting authority, SARS, tax-deductible business expenses are “expenses incurred in the operation of a business”. In other words, any purchase you make for the purpose of running your business counts as a business expense, although certain limitations do apply in some instances. You can consult with SARS or an accountant to determine which tax deductibles are applicable to your business.

Sole proprietor or company?

As a sole proprietor or a company, you are entitled to claim legitimate business expenses as tax deductions. However, if you run your business as a sole proprietor – that is, your business is not a separate legal entity from you – the income you make from trading must be reported as part of your personal income tax return. There is also no ‘minimum threshold’ to meet before you are required to file taxes.

Small business tax or turnover tax?

If you are registered as a company or sole proprietor, you can choose to pay standard small business income tax rates or turnover tax. Turnover tax is a simplified tax rate aimed at reducing administration for small businesses with an annual turnover of less than R1 million. The turnover tax system calculates tax on a sliding scale based on the turnover of the business.

If your small business is registered as a company and it meets certain qualifying requirements, you can register as a small business corporation (SBC). SBCs can access extra tax incentives, including a reduced tax rate.

As an SBC, you won’t have to pay income tax if you make a profit of less than R91 250 per year. If you qualify as a micro business for turnover tax, you will be exempt from paying tax if your turnover is less than R335 000 per year.

Depreciation of assets

Besides getting lower tax rates, small business tax benefits allow SBCs to depreciate their assets at a faster rate than other businesses. This reduces your taxable profit, in turn reducing your tax. SBC shareholders who pay the maximum small business tax rate on their income can access a tax benefit through a combination of salary and dividends.

Timely filing to avoid penalties

Ensure that you keep up with filing and payment deadlines to avoid admin fees, as well as interest and penalties for late filing. These fees are charged for each month you’re late, so they can add up. Above all, it’s critical to keep your bookkeeping in order – make sure that you have 100% accurate information on your finances.

Digitising your business

Cloud accounting offers many advantages, for example, increased convenience and productivity. Entrepreneurs can eliminate repetitive tasks like data entry and calculating tax, revenue, and cash flow forecasts, etc. Cloud accounting software can also help you reduce your business’ monthly expenses, as it’s paperless – you save on printing and paper.

There are standard tasks that all accounting software can help you with, including recording transactions, sending invoices, storing receipts, and managing cash flow; and tax management features make the filing of tax easier, which means more savings for your business.

Tracking income and expenses

With online accounting software, it’s easy to track your business’ income and expenses, as well as your tax commitments, throughout the year, from anywhere on any device. However, tax can get complicated, so if you’re not adept at navigating its intricacies, it’s best to consult an accountant.

Tracking expenses regularly is key to managing your finances effectively, maintaining positive cash flow and ensuring accurate record-keeping. Managing your taxes can help you achieve significant cost savings if done correctly. For more information on tax-deductibles, SARS provides a comprehensive guide on its website, www.sars.gov.za

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>

Please fill out the form below to receive the trail demo link

Personal Information
Where a party receives any personal information (“PI”) related to the other party, the party who receives the PI, will comply with and have adequate measures in place to ensure that its employees, agents, subsidiaries and representatives comply with the provisions and obligations contained in the Protection of Personal Information Act, No. 4 of 2013. Any PI pertaining to one party which is required by the other party, will only be used by that other party for the purposes of this contract and will not be further processed or disclosed without the written consent of the latter and the recipient of that PI will take all reasonable precautions to preserve the integrity and prevent any corruption or loss, damage or destruction of the PI. If and when the contract is terminated, each party will, save to the extent that it is required to do otherwise by any applicable law, erase or cause to be erased, all PI and all copies of any part of the PI relating to the other party”.

Please fill out the form below to receive the trail demo link

Personal Information
Where a party receives any personal information (“PI”) related to the other party, the party who receives the PI, will comply with and have adequate measures in place to ensure that its employees, agents, subsidiaries and representatives comply with the provisions and obligations contained in the Protection of Personal Information Act, No. 4 of 2013. Any PI pertaining to one party which is required by the other party, will only be used by that other party for the purposes of this contract and will not be further processed or disclosed without the written consent of the latter and the recipient of that PI will take all reasonable precautions to preserve the integrity and prevent any corruption or loss, damage or destruction of the PI. If and when the contract is terminated, each party will, save to the extent that it is required to do otherwise by any applicable law, erase or cause to be erased, all PI and all copies of any part of the PI relating to the other party”.