Why You Need a Qualified Accountant During the Covid-19 Pandemic
During these unprecedented times, when most businesses are likely to lose clients, there may be a temptation to slash accounting costs, a mistake you shouldn’t do. If you want to avoid dead ends or potholes, the best place to start is to look for a qualified accountant who can draft a roadmap for your business. This will enable you not only to plan for future contingencies but also to keep your business running smoothly.
Here’s how a qualified accountant helps businesses:
- An Accountant can help you access SARS Tax Breaks and other benefits
The South African government has made various support packages available for business owners, if you’re not a qualified accountant it can be challenging to know which scheme would suit your business. Only a good accountant will know their way around the different options and be able to advise on the best choice.
There are multiple tax breaks and schemes that can help ease cash flow, save money and even provide a capital injection. These are some of the SARS breaks you should know about:
An increase in the expanded employment tax incentive amount: The first set of tax measures provided for a wage subsidy of up to R500 per month for each employee that earns less than R6 500 per month. This amount will be increased to R750 per month at a total cost of around R15 billion. An increase in the proportion of tax to be deferred and in the gross income threshold for automatic tax deferrals: The first set of tax measures also allowed tax compliant businesses to defer 20 percent of their employees’ tax liabilities over the next four months (ending 31 July 2020) and a portion of their provisional corporate income tax payments (without penalties or interest). The proportion of employees’ tax that can be deferred will be increased to 35 percent and the gross income threshold for both deferrals will be increased from R50 million to R100 million, providing total cash flow relief of around R31 billion with an expected revenue loss of R5 billion.
Skills development levy
Skills development levy holiday: From 1 May 2020, there will be a four-month holiday for skills development levy contributions (1 per cent of total salaries) to assist all businesses with cash flow. This provides relief of around R6 billion.
See Treasury and SARS's Explanatory Notes on Tax Measures.
Corporate Income Tax
Postponing the implementation of some Budget 2020 measures: The 2020 Budget announced measures to broaden the corporate income tax base by (i) restricting net interest expense deductions to 30 percent of earnings; and (ii) limiting the use of assessed losses carried forward to 80 percent of taxable income. Both measures were to be effective for years of assessment commencing on or after 1 January 2021. These measures will be postponed to at least 1 January 2022.
Three-month deferral for filing and first payment of carbon tax liabilities: The filing requirement and the first carbon tax payment are due by 31 July 2020. To provide additional time to complete the first return, as well as cash flow relief in the short term, and to allow for the utilisation of carbon offsets as administered by the Department of Mineral Resources and Energy, the filing and payment date will be delayed to 31 October 2020, providing cash flow relief of close to R2 billion.
See Treasury and SARS Explanatory Notes on Tax Measures.
Case-by-case application to SARS for waiving of penalties: Larger businesses (with gross income of more than R100 million) that can show they are incapable of making payment due to the COVID-19 disaster, may apply directly to SARS to defer tax payments without incurring penalties. Similarly, businesses with gross income of less than R100 million can apply
- A qualified accountant helps you to to plan for contingencies
If you want your business to emerge stronger from the crisis, then you definitely need a qualified accountant by your side. A good accountant doesn’t just crunch numbers - but also budget forecasts for the future. Budgeting allows business owners to weigh the costs and benefits before committing resources. It is also about making an educated guess as to how the future of your business’s finances will look. It requires examining what happened last month, three months ago, and what this month last year looked like, and using that information to make sound financial decisions for your business.
Usually, accountants take the previous year’s budget as a starting point to get a clear idea about how to increase revenue, cut costs, or both. Budgeting also differs from one business to another, for example, a service provider will not have the same budget as that of a construction company.
Also, SMEs and established companies won't have the same budgets. However, all businesses take into account the economic, organisational and other variables that are not within the company's control. So it is understandable that in business, you have to account for both fixed and unexpected costs.
Let MGT help you navigate the arduous process of accessing government funding and tax breaks during these unprecedented times.
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