Your 2018 Tax Season Deadline: Brought Forward By Three Weeks?

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“The best way to teach your kids about taxes is by eating 30 percent of their ice cream” (Bill Murray)

The 2018 tax season for individuals opened on 1 July. Non-provisional taxpayers who use eFiling or file electronically at a SARS branch have had their submission deadline cut to 31 October. Other classes of taxpayers (provisional and those who manually submit   their forms) are on similar deadlines to prior years.

This change stems from SARS streamlining the process this year. This has benefits for both taxpayers and SARS.How and why SARS is streamlining the process

  1. Nearly two thirds of non-provisional taxpayers’ returns are completed within three months i.e. they are in by end September. This is followed by a lull until the middle of November when there is a last minute rush to complete these returns.

    SARS has brought the deadline for these taxpayers forward by three weeks. Thus taxpayers who either use eFiling or submit electronically at a SARS Branch must send in their returns by close of business on 31 October.This is significant as it affects the bulk of taxpayers. Make sure your staff members are aware of this date as there will be penalties and interest on late returns.

    The reason for this change is twofold:

    • It smoothes the workflow of SARS. The lull period they previously experienced will be taken up assessing returns in October. SARS will be able to request verification and finalise assessments by the Christmas break.
    • The bulk of taxpayers in this category will now have their returns finalised in December. This will give these individuals more peace of mind as they are less likely to have to answer queries during the holiday break.
  2. 1.6 million taxpayers submitted tax returns last year when they did not need to do so. This adds unnecessary workload to these taxpayers and to SARS who are overwhelmed by the volume of work during filing season.

    SARS has communicated with those 2017 taxpayers who unnecessarily submitted returns, urging them to only submit a return if they fall within SARS’ requirements. If this is successful, 25% less tax returns will be submitted.Taxpayers do not have to submit a tax return if:

    • Their employment income is R350,000 or less for the year and
    • They have one employer during the tax year and
    • They have no other income such as rentals received, car allowance and
    • They do not claim additional deductions e.g. medical costs, retirement funding.
  3. Approximately 860,000 eFiling registered taxpayers came into a SARS branch to do their tax returns in 2017.

    These taxpayers will be assisted by the Help-you-eFile service which will connect a member of SARS directly to the taxpayer. The taxpayer will then be helped through the eFiling process. SARS hope this will significantly increase the number of eFiling returns.

  4. 120,000 tax practitioners used a SARS branch to complete their clients’ returns.

    All tax practitioners will be encouraged to use eFiling for their clients’ submissions.

  5. Both taxpayers and SARS staff get inundated with documentation during filing season.

    When requesting verification data, SARS will be specific about the documentation it requires. This will reduce paper flow and time spent on this process by both the taxpayer and SARS.

  6. 2018 returns will be prioritised and taxpayers submitting income tax forms from prior years will have to wait longer for assessments. SARS has found that many of the scams surrounding tax happen with past-due tax returns. This will give SARS more time to check and detect fraud.
  7. Lastly, SARS will net off refunds or amounts owed on past returns, giving taxpayers a better picture of what is due to them or what they owe.

Your 2018 Tax Season Deadlines

Channel Due Date Type of Taxpayer
Manual by post or at a SARS Branch Drop Box 21 September 2018 Non-provisional and provisional Taxpayers
eFiling or electronic filing at a SARS Branch 31 October 2018 Non-provisional taxpayers
eFiling 31 January 2019 Provisional taxpayers

(Adapted from a SARS table)
Overall, the situation should improve for both taxpayers and SARS.

This article is a general information sheet and should not be used or relied upon as 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 financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

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Will Cash Disappear From Society?

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“Forewarned is forearmed” (Wise old proverb)

In the last decade we have witnessed the slow death of the cheque.  Today we have Bitcoin, payment apps and increasing use of the Internet and credit cards, so the question arises is cash also going to disappear? If so, it will have enormous implications for us.

The case for cash disappearing

In a recent study, 78% of Europeans expect to use less cash in the future. Countries such as Sweden and South Korea are pioneering the way to a cashless society and argue that:

  • Cash is incredibly expensive and costs between 5 and 15% of revenue. This is when you factor in the cost of ATMs, cashiers, the cost of bank branches (in Sweden only 5% of branches handle cash), security transit vans, the time taken to deposit cash and high bank charges.

The Bank of America says that 10% of its cost base is due to managing cash.

  • Robbery and crime fall when there is less money about.
  • It reduces organised crime and terrorism. In Europe the 500 Euro note is being phased out after it was discovered that the terrorists who killed 89 people in Paris in 2015 used high denomination notes to fund the attack.
  • Tax revenues, particularly indirect revenues like VAT show marked increases. VAT collections have improved 30% over the last five years in Sweden.

The other side

Contrary to conventional wisdom, cash now accounts for 9.6% of global GDP, up from 8.1% in 2011. The number of people in the UK who rely on cash has risen from 500,000 to 2. 7 million and in the past decade in the U.S.A., money in the economy has grown 50% relative to GDP.

So why is money still so prevalent?

There are some easy explanations such as:

  • The low interest rate environment has encouraged people to keep money rather than put it in the bank.
  • Globally the informal economy is growing and cash is the medium of exchange in this sector.
  • The global financial meltdown of 2008/2009 resulted in more people losing faith in banks.
  • The use of credit cards and other electronic payments has seen the level of consumer indebtedness grow. In fact, there is a very close correlation in countries embracing cashless societies and the growth in consumer debt. In a recent study, McDonalds put electronic devices in stores where consumers could order and pay online. Their sales in these stores rose by 30%.
  • The number of Internet scams has pushed people towards hoarding cash.
  • Crime statistics have in fact not gone down as was claimed above. In fact, where criminals can’t rob people of cash they go after the more vulnerable citizens such as the elderly.

In addition there are more subtle explanations such as:

  • In the current world of cynicism and mistrust, banks are regarded as part of the system supporting the wealthy top 1% which encourages people to move away from banks.
  • The recent incidents of state hacking (e.g. Russia meddling in the US 2016 elections) have given those in favour of a cashless economy doubts. Potentially, hacking could cause the financial infrastructure to collapse in which case it is prudent to still have cash in the economy.

The debate swirls on and on but it is probably safe to say that cash will be around for a long time, particularly in a developing country like South Africa.

This article is a general information sheet and should not be used or relied upon as 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 financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

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Have You Been Hacked? Check Now!

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In May this year data the ViewFines website was hacked, exposing a database containing the passwords, cell phone numbers, email addresses and I.D.s of 934,000 South African drivers with traffic fines. “If you think you may be at risk from the ViewFines data leak, read this article for more detail.

Last year the databases of several large estate agencies were hacked into and over 60 million records of personal information including IDs were exposed. New hacks are reported with depressing regularity, so this is clearly a growing phenomenon – not just in South Africa but globally.

Have I been hacked?

Troy Hunter is a globally acknowledged cyber security guru who picked up this breach. His website will tell you if you have been hacked – during this or any of the many other global hacks over the years – and if so when. Check it out on the “Have I Been Pwned?” website.

Enter all of your email addresses and you may be unpleasantly surprised by the results.

What should I do?

Check all your passwords. If your password for ViewFines.co.za (or any other hacked website) has been used for other accounts, then you are at risk.

Troy Hunter also offers an excellent service in terms of password protection. Have a look here.

The Protection of Personal Information Act (POPI) will help South Africans in terms of helping secure our private data, but only when it becomes effective.

This article is a general information sheet and should not be used or relied upon as 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 financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

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Small and Medium-Sized Businesses: How to Stay Healthy and Profitable

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Today getting an SME going is incredibly difficult as they face enormous red tape (FICA, getting loans, VAT registration and so on) and have difficulty getting access to money as financial institutions prefer funding large corporates where, for a similar amount of work, they earn higher fees.

Yet we should be doing everything we can to make SMEs sustainable as just under 50% of jobs in the economy are created by small business.

SMEs: 3 steps to staying in business

It is difficult for the new owner of a business to keep focused on what the business should be achieving. The early parts of a business just need so much work – hiring the right staff, setting up processes that will efficiently drive the business, attending to bankers’ and investors’ needs, dealing with unions, the list is endless.

  1. But it is incredibly important to allocate time to reviewing whether the business is on track, what the competition and market are doing and adjusting or tweaking your strategy.
  2. Secondly, all successful businesses need to grow and it is a fact that growth costs more money. As resources are scarce make sure you control expenditure tightly and carefully monitor your cash flows.
  3. Thirdly, you become a successful entrepreneur by having a unique idea or a different way of delivering your product or service. Make sure you keep innovating to stay one step ahead of your competitors.

What can we and Government do?

Beginning with Government, steps need to be taken to make it easier for small businesses to succeed such as following through with Government’s commitment to reduce red tape, considering extending tax concessions for up to five years (SMEs pay less than 20% of the corporate tax take) and looking at regional incentives like reduced rates, subsidised rentals etc.

On our side why not mentor young start-ups in the ways of business? Many young businesses, for example, don’t consider governance in their business and getting this off to a good start will help them in the long term.

These are the businesses that can solve our most pressing problem – unemployment. We should help them as much as possible.

This article is a general information sheet and should not be used or relied upon as 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 financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

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Companies: “XBRL” is Coming Soon. What is it and Are You Affected?

1_h86WRANB5oBVvy5INRKi0gThe Companies and Intellectual Property Commission (CIPC) will from 1 July 2018 require that all Annual Financial Statements (AFS) submitted to the CIPC be in eXtensible Business Reporting Language (XBRL) format.

What is XBRL and what are its benefits? 

It is a global standard for digital reporting. It uses a tagging software system whereby data can be used across many platforms without needing to recapture it.

This means it saves time, is more accurate and can be used as an analytic tool. For example, CIPC will be able to meaningfully compare AFS from different organisations which will be of value to users such as investors.

In addition, XBRL quickly identifies submission problems (making them quick to correct) and is extremely cost effective.

It is widely used overseas – for example, people submit their income tax returns in the UK using XBRL.

Who has to submit annual financials to CIPC?

Basically, any entity which is required by the Companies Act to have their AFS audited. These include:

  • Public companies and State Owned Enterprises such as Eskom,
  • Companies holding fiduciary assets of R5 million or more (estate agents’ trust accounts for example),
  • Non–profit companies carrying out activities which are in the public interest, such as a wetlands reserve,
  • Non-profit companies created by the State,
  • Companies whose public interest score is 350 or more,
  • Any company whose public interest score is at least 100 and compiles its AFS in-house,

If you fall into one of these categories speak to your accountant who will guide you through the process of creating your AFS in XBRL. Remember the implementation date is 1 July this year.

This article is a general information sheet and should not be used or relied upon as 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 financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

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The European Union has Implemented GDPR – It May Affect You

GDPR-Lock-on-Map-of-EuropeThe EU’s General Data Protection Regulation (GDPR) became enforceable on the 25th of May. It is regarded as the world’s most comprehensive legislation protecting private data.

GDPR may be applicable to South Africans if your business provides goods or services in the EU, and in certain other circumstances. Speak to your accountant if in doubt – there are hefty penalties for non-compliance.

POPI

As you know, South Africa’s own privacy law POPI (the Protection of Personal Information Act) is expected to commence any day now, and that’s when the one year grace period clock will start ticking.

Judging by the extensive media coverage given to GDPR last week, POPI will have a substantial impact in South Africa. Although the one year grace period will give you a year before enforcement kicks in, if you haven’t already started getting ready for POPI, speak to your accountant about it and watch this space – we’ll compile a checklist on how POPI will affect you once POPI commences.

This article is a general information sheet and should not be used or relied upon as 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 financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

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Risk Management for Your SME

business-challenge-jenga-e1527019929632“All courses of action are risky, so prudence is not in avoiding danger (it’s impossible), but in calculating risk and acting decisively” (Niccolo Machiavelli)

We are all aware that business, as with life, is full of risks and things go wrong from time to time.

Some of us shy away from planning for these risks, put off by complex methodologies such as the Risk Matrix, and say “this is not for me”.

But it can be quite simple

Why not just write down what can go wrong – you can do it alone or with your team. As you are experienced in business, you have plenty of knowledge of the hazards out there.

Once you have a list, then ask yourself, what is the likelihood of the event happening? If it is very low and the outcome of the event occurring will have a small effect on your business, move on to the next risk.

Some risks will have a substantial impact on your business and it may be difficult to come up with a strategy to counter this risk. Speak to experts in the field, then approach the risk from different angles until a solution appears.

Eventually, you will have a series of strategies that could save your business one day. Most of the risks and the solutions you identify will be things you will probably have already thought through. But there will always be one or two you haven’t thought of and that is the power and benefit of this exercise.

It’s not negative thinking  

For those who don’t like to dwell on what they call the negative, this exercise is actually a positive experience. Assessing what can go wrong and having a strategy to counter the risk will allow you to have the comfort of knowing you will be ready to react to adverse events when they occur.

Also, confronting your fears is never easy but by considering all possible angles and finding a solution you are in fact overcoming these fears. As they say, don’t meet your fears head on but tilt at them until you feel comfortable.

The unpredictable is happening more and more – who would have predicted Donald Trump becoming President? So engage in lateral thinking when you do this process.

You also need to factor in how other people will react – very few economists, for example, factored in the complete panic that set in during the 2008 financial meltdown. Thus, many had the strategy of selling down their holdings should financial cracks begin to appear, but in the avalanche of sell orders, they couldn’t offload their holdings and took substantial losses.

Just remember that all high-risk-takers survive because they consider all the risks and make plans to counter them.

Have a look also at these excellent TED Talks videos “Three Simple, Fun and Effective Tools to Help Manage Risk | Will Gadd | TEDxYYC” and “Risk Management: Chris Davenport at TEDxMileHigh”.

This article is a general information sheet and should not be used or relied upon as 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 financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

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When Do We Stop Working for SARS This Year?

398-20160429-043750-4118-021016_common_tax_m.max-784x410It has become a global phenomenon measuring Tax Freedom Day, the day up to which you work to pay your taxes – only after Tax Freedom Day do you start working for yourself. In 2018 it takes us South Africans 133 days or 39% of our working time to pay our taxes.

Generally, the trend has been rising – when the measurement began in 1994, it took 101 days to pay our tax. We have gone up by more than one month since then, which is quite a disturbing trend. This is set to continue as Government will take a few years to get its fiscal house in order.

However, when we benchmark South Africa against other countries, we are not doing too badly. As reflected in the table below, we are placed 11th out of 29 countries.

logista_June

Source: the above table is adapted from Wikipedia.

By the time you read this article, you will have paid your tax and for the rest of the year the money you earn is all yours!

This article is a general information sheet and should not be used or relied upon as 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 financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

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Lessons for Your Business: How Does the World’s Most Successful Company Keep Growing?

fullfillment-by-amazonAmazon is now regarded as the best company in the world – its market capitalisation is approaching R800 billion and its founder Jeff Bezos is the world’s richest man.

Year after year in customer satisfaction surveys Amazon invariably comes out on top. Jeff Bezos recently shared Amazon’s secrets in his annual letter to shareholders.

The key to this success is that high standards are now part of the culture of Amazon. How was this achieved?


The key principles

  • Standards are teachable

High standards are not part of our DNA but anybody willing to learn can absorb the requirements of high standards. This is refreshing in an era where many organisations are recruiting only well qualified people.

Once the ethos of high standards is taught and accepted it becomes infectious and spreads to the whole team and the organisation. Conversely, the opposite is true that low standards are also infectious.

  • Standards need to be high across all disciplines

Your business will not be successful unless all disciplines achieve high standards. If, for example, you have great marketing and production capabilities but poor distribution and sales staff the business will struggle to be competitive.

Bezos says all people have blind spots and cannot set high standards in all areas. But if you build up a strong management team which covers all spheres of the business, you will achieve best practice methodologies across the company.

  • Be realistic

Communicate to your staff that attaining world class standards involves hard work. It is not going to be easy but if there is a culture of team members striving to achieve these standards, then it will filter down to all employees.

  • Skills and teamwork

No individual has all the skills required to complete all functions in their team activities. But working in teams most often means that one team member will have a unique, necessary skill needed by the team. In other words, having a pool of skills in a team increases the overall skill levels of the team.

  • Work in narratives

Most surprising is that Amazon doesn’t work in PowerPoint presentations but in six page memos. At the beginning of each meeting one team will present a six page memo. The meeting will spend half an hour reading and discussing the memo.

This has many benefits – the team writing the memo spends time getting their thoughts and ideas into a well-constructed narrative format. As Bezos writes, you cannot lay down procedures on how to write a good memo but everyone recognises a good memo when they see it.

The power of this is that everyone in the team discusses and understands these memos. In turn it is well communicated to the organisation and thus builds up Amazon’s high standards.

Not everyone can write a high quality memo, but there is always someone in the team who can and if each team member contributes to it, then the team as a unit will have the skills to write a high quality memo.

Bezos says we need to accept that a high quality memo usually cannot be written in a couple of weeks – Amazon’s best memos are often written and rewritten over a few months until they achieve the high standard and clarity required. This needs to be communicated to the organisation, otherwise teams will quit if they can’t write a good memo in a week or two. As Bezos writes above, be realistic.

  • High Standards equate to a successful business

Once you have achieved this across the organisation, your business will have world class products/services, people and processes. In a world of fast moving consumer expectations and rapid change, building a strong organisation with high standards is critical to staying competitive.

You also find that high calibre people are drawn to companies like Amazon. This reinforces the success of the company and enables it to keep pulling away from the competition. We live in a dynamic world so we need to keep growing our knowledge and skills.

Some of us may not like the idea of using memos to build standards but good leadership, fostering a culture of learning (standards are learnt), quality in all aspects of the business and encouraging teamwork will put your business on the path of success.

This article is a general information sheet and should not be used or relied upon as 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 financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

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Practical Tips on Cash Flow

cash-flow-1473836262“Never take your eyes off cash flow because it’s the life-blood of business” (Richard Branson)

The Companies Act is underpinned by the assumption of liquidity and solvency – directors and owners are mandated to ensure the business can meet all its short term obligations.

The best way to achieve this is via cash flow.

As cash flow is fundamental to any business, this should be managed by senior management.

The starting point

Sit with your accountant and work out the monthly inflows and outflows from your bank statements. Put them into a spreadsheet and then review this frequently (weekly is desirable) until the cash flows start to get accurate. More importantly you begin to understand the patterns of your company’s cash flows.

Drill down

The most significant aspects of cash flow are:

  • Sales. Can I reduce discounts/rebates without losing sales? Is it possible to sell different products to customers? How do I grow my customer base?
  • Ultimately, no business will flourish without growing sales. Also key to sales is managing debtors:
    • How much contact do you have with customers? Getting to know them will reduce the chance of slow payment.
    • How quickly do you respond to customer queries? Are credit notes issued promptly?
  • Stock. Do you have a good forecasting system to balance not losing sales with minimising stock holding? Is slow moving stock quickly identified?
  • Creditors. Do you maximise the possibilities with creditors, for example are all possibilities in terms of early settlement discounts taken advantage of?
  • VAT. VAT should be included in your sales figures as well as your purchases, and your VAT return payments factored into your cash flow.
  • Work out your free cash flow. This is the excess cash you generate after liabilities have been met. This is crucial to your business as it means you can finance new assets or pay more dividends. Essentially it gives you flexibility and more freedom to grow and run your business.

When you review your business after each month end, build in cash flow to the review. Many businesses now have free cash flow as a key performance indicator.

Cash flow is critical to any business – give it the attention it deserves.  It will also give you a good understanding of how the business is performing.

This article is a general information sheet and should not be used or relied upon as 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 financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

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