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Only the most optimistic among us would declare Budget 2017 a Small Business friendly budget!

There are however those who make the point that it could have been worse, so maybe we should celebrate none the less.

So, what are the positives?

  • VAT as many speculated, did not increase.
  • Company Taxes remained the same
  • R3,9 billion allocated for SMME’s and Cooperatives over the next 3 years

The negatives?

  • Limited bracket creep to take into account inflation
  • Dividend withholding tax increased to 20{a87fdf049d1ab93073cc4529e6637aafdc037c90a3a9dc13375d149f4a1ddf2f}
  • New super Tax bracket of 40{a87fdf049d1ab93073cc4529e6637aafdc037c90a3a9dc13375d149f4a1ddf2f} for those earning more than R1,5 million per annum
  • 30c per litre increase in Fuel levy
  • 9c per litre increase in Road Accident Fund levy

Despite the pro small business leaning of the budget speech, the clear facts are that business ownership for all entrepreneurs is going to carry more “penalties” than many might think the risks warrant!

So how can these penalties be mitigates? The best way, is to ensure your business qualifies as a small business corporation (SBC) as this still allows for a little breathing room from the new tax increases.

How, you may ask?

The table below illustrates the different outcomes on R1,5 million profit and shows that being an SBC is clearly the best option.

 

Income Type PAYE SBC Tax Co Tax Dividend Tax Total Paid
           
All Salary R533 625 0 0 0 R533 625
           
SBC Mix Sal / Tax / Div. R308 124 R59 098 0 R98 180 R465 402
Co. Mix Sal / Tax / Div. R308 124 0 R154 000 R79 200 R541 324
           
SBC All Dividend 0 R59 098 R266 000 R234 980 R560 078
Co. All Dividend 0 0 R420 000 R216 000 R636 000
           

At Phezulu VBO we do more than just assist clients with tax planning, we are your “one stop SME shop”, assisting with everything from Accounting, Business Management, BEE, Consulting, Company Registration to Payroll and Mentoring.

For more information, please visit our website or give us a call on 010 003 8558

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