Making use of professional accounting and tax independent review services to evaluate whether your business is tax compliant is certainly recommended, especially if you have up to now handled the tax calculations and submissions in-house.
Tax, accounting and payroll administration regulations change regularly and even if you were up to speed with the previous financial year’s requirements you may have missed one or two important regulation changes during the past few months.
Independent review services enable you to identify compliance problem areas and means to correct the situations. In addition, you can also benefit from such review services when it comes to BEE compliance, helping you to identify areas in which changes must be made before the next verification must be done.
If you run a micro-business and have until now paid provisional tax, you know the administrative burden associated with having to calculate, submit and pay taxes twice annually. Expert independent review consultants can, for instance, help you determine whether your business will be better off paying turnover tax instead of provisional tax.
What is Turnover Tax?
Turnover tax was introduced by SARS as a single tax system to make it easier for small and micro-businesses to comply with tax regulations and to streamline their tax administration. It is a relatively straightforward tax system suitable for small and micro-businesses with turnovers under R1 million per year. You can consider this type of tax is you are a sole proprietor, partnership, and small private company, co-operative or still operate under old close corporation business entity requirements.
When paying turnover tax you will pay one tax instead of having to pay income, provisional, VAT, capital gains and secondary taxes. It is not compulsory and you should thus review whether you will benefit from participating in the tax system.
How it Works
A sliding tax rate system is applied to your business annual taxable turnover for the year of assessment. The rates change annually according to SARS tax tables, so it is recommended that you view the latest information at the SARS website or get expert tax review assistance from one of our accountants at The Tax Shop. A business with a turnover of, for instance, under R100 000 doesn’t pay tax, whilst a business with a turnover over R100 000 per annum, but less than R300 000 pays 1% of each Rand above R100 000 and so on.
Not a Means to Reduce Your Tax Burden
Though it is possible to pay less tax when you join the turnover tax system, the main aim of the system is to streamline tax administration. If you decide to join as small business, you must remain on this type of tax system for a minimum period of three years unless SARS disqualifies your business. Should you decide to return to provisional tax payment after three years, you many not register for turnover tax for another three years.
How to Participate
You will need to register for turnover tax with SARS by the last day of February to be assessed for turnover tax in the following year of tax assessment. If it is a new business, you will need to register for turnover tax within 60 days from starting with your business activities through the completion of the TT01 form.
What is Important?
Meticulous recordkeeping of income and expenses is essential on this tax system. You must keep the invoices and full records of transactions in support of your tax return entries. This includes receipts for accounts paid, invoices, toll fee receipts, parking receipts, cash slips, and even your cancelled cheques.
If you decide to join this tax system open a bank account for your business to separate personal expenses from the business expenses. Keep record of your fixed assets, annual stock, vouchers, cash receipts, payments and the details of such payments in addition to records regarding assets, liabilities, profits and valuation of loans.
For best results and to avoid pitfalls in participating in turnover tax, get help from professional tax consultants. When you outsource the tax calculation function the tax consultant deals with most of the administration, which will lighten your administrative burden. The tax consultant will also be able to provide an independent review of your business tax obligations to help you make an informed decision regarding the best tax system for your particular situation.