Preparing for the Financial Year-End

Posted by

Financial year-end can often be a stressful and is a very busy time for companies, as each department gathers their reports and statements, in order to complete the financial year-end successfully.

In order for a smooth process you need to start early and check that your company has records, reports and statements for the following:

  • Bank statements: all business related accounts and make sure they have been reconciled
  • Cash control: Record of cash on hand
  • Accounts receivable (debtors): Ensure that all payments from clients have been processed by the year-end
  • Accounts payable (creditors): Ensure all delivered goods and payments made to the supplier have been captured. You should have a statement from every supplier.
  • Accruals and provisions:
    – Accruals should only include amounts which may be charged to the business at a later date, for work done in respect of the current financial year e.g. accounting and audit fees.
    – Provisions should only include amounts which are due by the business at year-end but may not necessarily be paid out in the coming year e.g. leave pay and staff bonuses.
  • Control accounts – there are usually two types:
    – Payroll controls
    – VAT controls
  • Loans: Interest-bearing, non-interest-bearing and current portion.
  • Fixed assets: A register of fixed assets is a statutory requirement for all private companies and close corporations. It is also good practice for trusts and sole proprietors to keep this register.
  • Stock take: Physical count of stock, the value of the stock and that cost price is reasonably correct. Consider devaluing or writing-off slow-moving or obsolete stock.
  • Expenses: Check that there are 12 entries for all regular monthly expenses. Check that no capital expenditure has been included.

Get in touch with Professional Accountants for assistance in closing the books on your financial year-end.

Financial Year-End Tax Deductions

Posted by

The following types of businesses are liable to submit a return under the Income Tax Act, 1962 for the payment of tax on all income received by or accrued to them within a financial year:

  • Listed Public Companies
  • Unlisted Public Companies
  • Private Companies
  • Close Corporations
  • Co-operatives
  • Collective Investment Schemes
  • Small Business Corporation (s12E)
  • Body Corporates
  • Share Block Companies
  • Dormant Companies
  • Public Benefit Companies
  • Sole Proprietors
  • Partnerships (each to do their own return)

Tax Returns Due

Remember to make the most of your tax deductions. Here is a list of some “forgotten expenses” that in most cases, you can claim:

Throw a party: if you threw a “thank you” or Christmas party for your employees and/or clients, this can be claimed for.

Travel: if you combined a family holiday with a business trip you can claim a percentage of the expenses for business.

Education: educational events and studies can be written off, for example: seminars, workshops, part-time studies, as these contribute to making your business better.

Entertaining: if you took your clients or colleagues to a show, watched a rugby or soccer game or out to dinner for example. This expense is to promote your business and stimulate employee morale.

Cell phone: calls and contracts.

Computer costs: new equipment, software, repairs, ink cartridges, Internet providers and website hosting services.

Advertising: remember that marketing your business, ensuring it is visible and people are aware that you exist is very important. Don’t forget to budget for this and these expenses can be claimed. Examples of advertising: signs, flyers, newspaper ads, Internet marketing etc.

Accounting fees: it makes your life a lot easier and less stressful by hiring a professional accounting firm to take care of all your tax affairs. Professional accountants can also make the most of your claim and try get you the best refund for your business AND…..they are tax deductible too….. So if you pay 28% and your accounting fee is say R10 000 – effectively you only pay R7 200 – it’s like getting a 28% discount…. J

Other expenses that are also in most cases claimable:

  • Bank charges
  • Interest paid: on bank accounts & business credit cards
  • Legal fees: related to your business
  • Samples: if you are considering buying a product for the business
  • Electricity & water
  • Insurance
  • Staff salaries & wages
  • Staff welfare & training
  • Staff medical aid
  • Maid salary (for business): including bonus
  • Gardener salary (for business): including bonus
  • Cleaning products
  • Repairs and maintenance: such as plumbing, electrical, tiling, painting etc
  • Rates: annual for your business premises
  • Rent for your business (or part thereof)
  • Bond interest: not your monthly repayment, only the interest paid to the bank or other home loan provider
  • Security
  • Minor fixed assets: for example desk, chairs under R7000 each
  • Vehicle petrol, oil, repairs & insurance: only if the car belongs to the business
  • Printing & stationary: this can also include newspapers and magazines that are relevant to your business
  • Refreshments

Some more information:

Provisional tax payment due dates for this 28 February 2014 year-end:

  • 1st payment was due by 31 Aug 2013
  • 2nd payment is due this 28 Feb 2014
  • 3rd payment, which is voluntary, is due on 30 September 2013  (for 2013) / 30 September 2014 for 2014

Provisional tax payment due dates for a 31 May 2014 year-end:

  • 1st payment was due on 30 Nov 2013
  • 2nd payment is due on 31 May 2014
  • 3rd voluntary payment is due on 30 Nov 2014

Be prepared and speak to one of our professional accountants today. Have peace of mind knowing that your tax affairs are being taken care of, so that you can continue with business.

 

Employment Tax Incentive

Posted by

There are many unskilled and inexperienced youth in South Africa and it is difficult for them to start contributing to the economy without experience. Many employees have been reluctant to hire inexperienced unskilled youth, and contributing to this fear has been the restrictiveness of the labour regulations.

Last year, SARS implemented a new incentive scheme for businesses to employ young inexperienced work seekers, called the Employment Tax Incentive (ETI). It reduces the employers cost, of hiring young workers, through a cost-sharing mechanism with the government. It is in effect since the 1st of January 2014.

How do I qualify?

An employer qualifies for ETI if the employer is:

    • Registered for employees’ tax (PAYE);
    • Not in the national, provincial or local sphere of government;
    • Not a public entity listed in Schedule 2 or 3 of the Public Finance Management Act (other than those public entities designated by the Minister of Finance  by Notice in the Gazette);
    • Not a municipal entity;
    • Not disqualified by the Minister of Finance due to displacement of an employee or by not meeting such conditions as may be prescribed by the Minister by regulation.

An individual qualifies as an employee if he or she:

    • Has a valid South African ID;
    • Is 18 to 29 years old (please note that the age limit is not applicable if the employee renders services inside a special economic zone (SEZ) to an employer that is operating inside the SEZ, or if the employee is employed by an employer that operates in an industry designated by the Minister of Finance;
    • Is not a domestic worker;
    • Is not a “connected person” to the employer;
    • Was employed by the employer or an associated person to the employer on or after 1 October 2013; and
    • Is not an employee in respect of whom an employer is disqualified  to receive the ETI (i.e. the employee is paid below the minimum  wage applicable to that employer or paid a wage below R2 000 per month if a minimum wage not applicable).

Please note: There is no limit to the number of qualifying employees that an employer can hire.

 How does it work?

An employer must follow these steps, and calculate & claim the incentive on a monthly basis:

  • Identify all qualifying employees in respect of that month
  • Determine the employment period for each qualifying employee
  • Determine each employee’s “monthly remuneration”
  • The EMP201 form was amended to include a field for claiming ETI, which can be seen on this SARS link.
  •  Calculate the amount of the incentive per qualifying employee as per the table below:
Monthly Remuneration ​ Employment Tax Incentive per month during the first 12 months of employment of the qualifying employee ​ Employment Tax Incentive per month during the next 12 months of employment of the qualifying employee​
R 0 – R2 000 ​ ​50% of Monthly Remuneration ​25% of Monthly Remuneration

R 2001 – R4000 ​

 ​R1 000 ​R500

R 4001 – R6000 ​

 Formula: R1 000 – (0.5 x (Monthly Remuneration – R4 000)) ​ ​Formula: R500 – (0.25 x (Monthly Remuneration – R4 000))

To determine the first or the second 12-month period, only count the months where the employee was qualified. For example, the employee may be qualified during the first three months and not qualified in the fourth and the fifth months. If the employee is qualified in the sixth month, then the sixth month is month is counted as number four, as far as the 12-month period is concerned.

How long is it available for?

The initial end date of 31 December 2016 was extended to 28 February 2019.

This information has been obtained from the SARS website

Tax Season for 2013 Is Now Closed For Non-Provisional Taxpayers

Posted by

However if you’re a provisional taxpayer the deadline was 22 Nov 2013 and if you are submitting it via eFiling the deadline was extended to 31st of January 2014 – provided all your tax affairs are in order.

You need to submit if you are:

  • Younger than 65 years old and earned R63 556 income during the 2013 year of assessment,
  • 65 years of age or older and earned R99 056 for the same period,
  • 75 years and older and earned R110 889 for the same period.

(more…)

Why Are Financial Statements So Important?

Posted by

Annual financial statements are very important as they provide you with a lot of information about your company and its future.

Annual financial statements can provide you with information such as earnings and if they’re higher or lower than the previous year, how sales are doing and whether the company is making more money than what it is spending. All these numbers should be clearly represented on a company’s annual financial statements.

Annual financial statements are a good indication of where the business is at financially and is useful in determining an estimate at how the business will do in the following year. It can also give a good idea of the management’s strategic plans and will let you know how management plan to build on the company’s current success, of improve on its failure if that’s the case. These statements can help management make intelligent decisions on what’s working and what isn’t in order for the business to succeed.

Annual financial statements are also important for investors to analyse investment potential and good financial statements help banks determine whether or not to loan money to a company. An annual financial statement can also help a company decide whether their customers and suppliers are going to be a good or bad risk to do business with.

An annual financial statement is the one document within a company that says “Take a look at what we do, what we’ve done, and what we will do.” Investors, banks, clients, and potential customers all rely on a company’s annual financial statement to determine how doing business with that company is going to help them. A company’s annual financial statement is usually readily available for perusal from the company itself or on their website and it is almost always free for investors, banks and a range of other people to have a look at.

The Close Corporations Act requires that companies provide annual financial statements and they are required to be in agreement with all accounting records of the company. If you and your business requires help with this, we at PATC can help you. We will work with you in order to provide an accurate annual financial statement of your company.

For more information on how we can help you do this, please contact us.

Image courtesy of FreeDigitalPhotos.net

Record Keeping Tips For Businesses

Posted by

When it comes to owning your own business and working for yourself, there are a lot of things to remember. All these aspects to remember are things that could help or hinder your business. One very important job to remember is that of record keeping. It requires a fair amount of patience and organisation but, if done properly, can help you in many ways.

Keeping good records can help you keep track of the progress your business is making, prepare your financial statements, prepare your tax returns and keep track of your expenses. It means staying on top of your business and being in the know of all that is coming into your business and what’s going out.

The type of records you need to keep depends on your business but the general rule of thumb is to clearly keep track of your income and expenses. The way to do this best can be alphabetically, numerically or by date and month. Some business people work best with everything arranged by month, others by name. Whichever way works for you, it’s best to be, and try to stay, organised.

If your records are organised and kept together, it’s easy to keep track of what’s happening and what you need for various times, e.g. tax season.  If something also goes wrong within your business, good record keeping can help rectify the problem and potentially save you money. If you are not a very organised person and are someone who struggles to keep your records in order, we suggest hiring someone to help you keep your records in order.

It is suggested that you keep all records for a minimum of 7 years. By not keeping your records, or if you find yourself not being able to produce a record of something, SARS could penalise you up to 200%. Because SARS could ask for proof of something regarding your business at any time, we advise that you keep your records up to date and organised for the recommended 7 years. Additionally, if you cannot support any deductions you’ve made, SARS will question the validity of all your claims – an unnecessary situation one might find themselves in if only they had stayed on top of their records.

Because record keeping is so important, it is vital that it is done correctly. It can be as easy as keeping files and folders for each expense, but if you’re not a very organised person, PATC is on hand to help keep you on top of your business records. For information on how to keep good records, or how to be more organised with your records, contact us today and we’ll help your stay on top of your record keeping.

Image courtesy of FreeDigitalPhotos.net

 

Domestic Workers

Posted by

What exactly are the rules and regulations regarding domestic workers?

Approximately 1 to 1.5 million South Africans work as domestic workers, gardeners and child minders. These days, there are far more rules and regulations regarding domestic worker than in the past. In present day, they are now considered regular workers just like a chartered accountant, or doctor would be. Therefore, they are entitled to the same benefits and answer to the same rules as anyone else. But what exactly are these benefits and rules?

General rules:
The general rules of a workplace now apply to domestic workers. The same notice period and termination of employment applies to domestic workers as normal workers. Transport allowances and bonuses are not specified and are therefore open for negotiation between parties. Working hours, public holidays, annual, sick maternity and family responsibility leave and deductions all apply to domestic workers the same way that they would to anyone else.

Wages:
Wages are calculated according to a table and take working hours into account. It also takes various areas into account. Domestic workers are entitled to a payslip which includes all regular information as any normal payslip. Deductions are permitted to be included; however, certain deductions are not permitted. These include; breakages, damages, clothing and training.

Termination:
Normal termination procedures apply to domestic workers. On termination of services, the employer must give the domestic worker a certificate of service.

Housing:
Should you provide your domestic worker with housing, it needs to fulfil certain criteria. It needs to be weatherproof and in good condition, it has to have at least one window and door that can be locked, and it needs to be fitted with a toilet and shower/bath, or it has to have access to another bathroom. A deduction of no more than 10% may be taken for accommodation.

UIF Contribution
If your domestic worker works for you for more than 24 hours a month, they must be registered for UIF. It is the responsibility of the employer to register their domestic worker with UIF and ensure that payment is made. Monthly contributions are 2% of the worker’s wage. If a domestic worker is employed by more than one employer, each employer must register the domestic worker separately and ensure payment is made.

It is important to be up to date with the regulations regarding domestic workers. As they are now considered normal workers just like everyone else, the same rules apply to them and the same consequences can apply to you should you not follow procedure.

For more information on tax and UIF, contact Professional Accountants & Tax Consultants and we can help you and answer any questions you might have.

1 July 2013 was the start of 2013 Personal Income Tax Filing Season

Posted by

What info do you need and how can PATC help?

You might be cringing at the thought of submitting your tax returns but it need not be that difficult, let us help you tick off the check list and get all your tax documents in order and we will submit your tax return for you.

 

  • Firstly you will need an IRP5, (this is the employees’ tax certificate your employer issues to you) however this is not essential as we can get this information for you from SARS.
  • If you have a retirement annuity with will need to provide a contributions certificate.
  • You also need to provide all details of medical expenses incurred and this information will be sent to you directly from your medical aid provider.
  • Details of medical expenses paid by you but not covered by medical scheme.
  • If you receive a travel allowance, please provide details of business travel such as a Log Book, details of your car (make, model, registration number of the car and purchase price).
  • Further information that you may need to provide is financial statements, if applicable e.g. business income, certificates that you received in respect of investment income [IT3 (b)] and or any other documentation relating to income you received or deductions you want to claim or we can assist you to prepare the Annual Financial Statements.
  • Certificates you received for the local interest income earned.
  • Any other documentation relating to income received or accrued, such as remuneration that has not been reported to SARS by your employer, or business or investment income, etc.
  • Banking particulars (I.e. Bank account number, bank name, branch code branch name type of account).
  • Completed confirmation of diagnosis of disability form (ITR-DD) if applicable.
  • Information relating to foreign tax credits withheld.

Please note that although we will be using all of the above documentation to complete your return, it is NOT submitted to SARS with your return. You must retain this documentation for a period of five years in case SARS calls for them.

For a complete guide on all the documents you require for your tax return, or if you need assistance filling your tax return, please contact the tax consultants at PATC today!

SARS Scams and Phishing Emails

Posted by

People are subject to scams every day and they are becoming increasingly difficult to spot the difference between a scam and a legitimate email so you need to remain vigilant when working online. As a result of this increase in scams and phishing attacks SARS has created a section of the website where they will post updates of any scams they have heard about. Similarly they would like you to tell them about any emails you think are scams or phishing. To report or to get more information on phishing, please send an email to phishing@sars.gov.za or call the Fraud and Anti-Corruption Hotline on 0800 00 2870.

How do you know if a SARS email is a scam or not?

Fraudulent emails are always aimed at enticing unsuspecting taxpayers to part with personal information such as bank account details. Examples include emails that appear to be from returns@sars.co.za, or refunds@sars.co.za indicating that tax payers are eligible to receive TAX refunds. Once taxpayers put their personal information such as banking details into these false forms, the information is then fraudulently extracted by the criminals to clear out your funds.

Members of the public are randomly emailed with false emails made to look as if these emails were sent from SARS so take your time to look through your emails properly and follow these tips below: –

Do not open or respond to emails from unknown sources

  • Beware of emails that ask for personal, tax, banking and eFiling details (login credentials, passwords, pins, credit / debit card information, etc.) as SARS will never ask taxpayers for such information in an email.
  • SARS will not request banking details through the phone, email or websites.
  • Beware of false sms’s.

Management Accounting Best Practices

Posted by

Management accounting is a specialised type of accounting in which accounting firms focus on the requirements and use of accounting information to managers within companies. This information helps to provide managers with data and advice that allows them to make informed business decisions, while also improving management and control functions. Compared to financial accounting, management accounting differs in that it is forward-looking rather than historical, model based rather than case based, intended for managers rather than stakeholders or clients, confidential instead of publically reported and focused on the needs of managers rather than general accounting standards.

The industry has changed greatly as business trends have changed, with many changes in the best practices of management accounting. Professional accountants who specialise in management accounting need to realise that both traditional practices and innovative practices play a role in ensuring the best practices overall.

Some of the more essential core practices include the following:

1. Determine user needs

While financial accounting has set guidelines and practices, management accounting focuses on specific needs of the user. Every business is different, and every management requirement is also different, therefore accountants need to spend time identifying the exact needs in order to develop a strategy. Users request different reports and analyses depending on their objective, with anything from employee overtime hours to expenses and other areas to be considered.

2. Determine specific information required

Companies retain a wide range of information that pertains to the management of the business, from production costs to payroll information, expense information and other financial data. Professional accountants handling the management accounting for the company therefore need to understand exactly what information is required by managers to reach their specific goals and also determine which information is relevant to these goals.

3. Understanding the role of internal customers

For management accountants, managers and employees take the role of internal customers. Each person’s role within the company is different, and accountants need to understand each of these roles in order to accurately identify tasks and assist properly. The accountant can then deliver reports and analysis that target these specific needs within the company, in order to assist all internal customers in reaching their business goals.

4. Communicate effectively with all role players

Communication plays a vital role in management accountant, and professional accountants working within the management sphere need to be able to effectively listen, process information and report back to managers at all times. In the accounting world, jargon is used on a regular basis. For most businesses who do not work within financial industries however, many of these terms are not understood. Being able to effectively communicate concepts and strategies is crucial, so that all parties are able to understand the accounting processes at all times.

5. Strategic, performance and risk management

A final essential practice within management accounting is the ability to develop and implement strategic, performance and risk management approaches within the company. As this type of accounting is forward-thinking rather than historical and partners with management areas, professional accountants working with management need to be able to understand the importance of these approaches in order to best serve the needs of companies.

Need and Accountant? Contact us.