A little more than a month ago, President Cyril Ramaphosa announced a nationwide lockdown that will redefine the way we do business for years to come.
For many, the time has been marked by uncertainty as small businesses were forced to close their doors, or change their operating models to adjust to the new reality.
We here at The Beancounter have been hard at work to assist our clients by not only utilising the many avenues of public and private support available to you, but also provide you with expert advice to help your business thrive during and after this unprecedented period.
SMME Covid-19 relief funds and other support measures
Applications are now open for the South African government’s SMME relief fund. The fund will provide businesses with funding, similar to Johann Rupert’s Sukuma Relief Programme, which will have to be repaid at an interest rate of prime minus 5%. It is available to 100% South African owned businesses, who are tax compliant and with a 70% South African workforce, and can be applied for directly from the department of small business development.
We’ll continue to assist our clients with these applications at no cost.
Additional state support for SMMEs:
President Cyril Ramaphosa on the 21st of April announced a series of additional relief measures for small businesses affected by Covid-19 which include:
- For businesses who can prove that they’ve been negatively impacted during this period, SARS will not enforce any penalties on late payments.
- Individuals and businesses who donate to the Solidarity Fund will be eligible for a 10% tax donations deduction.
- All businesses will receive a four-month skills development payment holiday.
- Pay as your earn (PAYE) deferrals have been increased from 20% to 35% for the four-month deferral period.
- The previous turnover threshold for tax deferrals is being increased from R50 million to R100 million a year. Companies with a turnover above R100 million can apply for a deferral directly from SARS.
The Beancounter will be in touch with all our clients about the additional measures as soon as we have received more information on the initiatives, and how they will be implemented.
Covid-19 assistance questionnaire
All our clients are reminded to complete our Covid-19 assistance questionnaire. The questionnaire will enable us to support you to plan, adjust and make use of the financial assistance available to you. If you have not been able to complete the questionnaire, or have not yet received it, please contact your account manager. Most of our clients have already received funds from the TERS program and we will continue to support you throughout this period.
Logbooks for the new financial year
The new financial year for individuals started on the first of March 2020. Therefore, individuals who receive a travel allowance, or have right of use of a company car, are reminded to keep an accurate logbook. Without it, you will not be able to claim any travel expenses from SARS. Your account manager will be able to assist you with a template if you do not have one.
Save money with Small Business Corporation tax rates
After Finance Minister Tito Mboweni’s budgets speech in February, South African businesses breathed a sigh of relief as no major changes were made to companies’ tax rates.
In fact, the tax brackets for Small Business Corporations (SBCs) were slightly adjusted to BENEFIT small businesses.
The SBC tax rate means that businesses with a turnover of less than R20 million a year, and meet certain criteria, do not pay the 28% standard corporate tax rate.
Instead, following the minister’s announcement, these are the tiered tax rates these businesses are required to pay:
This means small businesses are allowed to only pay tax on profits exceeding R83 100.
The tax savings on a business that has a taxable profit of R100 000 is, therefore, R26 817.
How to qualify for SBC tax rates:
The basic requirements for businesses to qualify for the SBC tax rate are:
- All shareholders in your company should be natural persons (so no trusts or other companies).
- The shareholders in your company should not have any shares in other companies.
- Your company’s gross income for the year should not exceed R20 million.
- Not more than 20% of your gross income should come from rendering a personal service.
- Your company should not qualify as a personal services provider. And if it does, it should employ at least 3 persons, who are not connected persons.
If you do not qualify:
You might still be able to qualify for the SBC tax rate by restructuring your business. Speak to your account manager who would be able to help advise on the changes you can implement to meet the minimum requirements (such as changing shareholding etc.).
Final words…
Times of uncertainty are often a time to pause and reflect on your personal journey and how your business has grown, the areas that might require improvement and where you would like to go in the future.
Use this time wisely, and aim to position yourself and your business in such a way to make use of the opportunities that lie ahead
And remember, we will always be here supporting you along the way.