Transfer of a property: Is vat or transfer duty payable?

Posted on 17 of June, 2016 by BadenhorstOud in Property

A purchaser is responsible for payment of transfer cost when acquiring an immovable property, but it should further be established if the transaction is subject to the payment of VAT or transfer duty to SARS.

When an immovable property is transferred, either VAT or transfer duty is payable. To determine whether VAT or transfer duty is payable one should look at the status of the seller and the type of transaction.

VAT

If the seller is registered for VAT (Vendor) and he sells the property in the course of his business, VAT will be payable to SARS. A vendor is a person who runs a business and whose total taxable earnings per year exceed R1 000 000. He will then have to be registered for VAT. A further stipulation is that the property that is being sold must be related to his business from which he derives an income.

The Offer to Purchase should stipulate whether the purchase price includes or excludes VAT. If the Offer to Purchase makes no mention of the payment of VAT and the seller is a VAT vendor, it is then deemed that VAT is included and the seller will have to pay 14% of the purchase price to SARS. It is the seller's responsibility to pay the VAT to SARS, except if the contract stipulates otherwise.

When a seller is not registered for VAT, but the purchaser is a registered VAT vendor, the purchaser will still pay transfer duty but can claim the transfer duty back from SARS after registration of the property.

Transfer duty

When the seller is not a registered VAT vendor it is almost certain that transfer duty will be payable on the transaction. A purchaser is responsible for payment of the transfer duty. Transfer duty is currently payable on the following scale:

The first R750 000 of the value of the property is exempted from transfer duty.
Thereafter transfer duty is levied at 3% of the value of the property between R750 000 and R1 250 000.
Where the value of the property is from R1 250 001 up to R1 750 000, transfer duty will be R15 000 plus 6% on the value of the property above R1 250 000.
If the value of the property falls between R1 750 001 and R2 250 000, transfer duty will be R45 000 plus 8% of the value of the property above R1750 000.
On a property with a value of R2 250 001 and above transfer duty is R85 000 plus 11% on the value of the property above R2 250 000.

Transfer duty payable by an individual or a legal entity (trust, company or close corporation) is currently charged at the same rate.

Transfer duty is levied on the reasonable value of the property, which will normally be the purchase price, but should the market value be higher than the purchase price, transfer duty will be payable on the highest amount. Transfer duty is payable within six months from the date that the Offer to Purchase was signed.

In instances where a party obtains a property as an inheritance or as the beneficiary of a divorce settlement, the transaction will be exempted from payment of transfer duty.

Where shares in a company or a member's interest in a close corporation or rights in a trust are transferred, the transaction will be subject to payment of transfer duty if the legal entity is the owner of a residential property.

Zero-rated transactions

This means that VAT will be payable on the transaction but at a zero rate. If both the seller and the purchaser are registered for VAT and the property is sold as a going concern, VAT will be charged at a zero rate, for instance when a farmer sells his farm as well as the cattle and the implements.

Exemption

Transfer duty, and not VAT, will be payable when a seller who is registered for VAT sells a property that was leased for residential purposes.

It is thus important for a purchaser to establish the status of the seller when buying a property. The seller who is registered for VAT should carefully peruse the purchase price clause in a contract before signing, to establish if VAT is included or excluded.

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)

Misuse of assessed losses

Posted on 17 of June, 2016 by BadenhorstOud in Business

An assessed loss for income tax purposes is a potentially valuable asset: it represents past losses made by a taxpayer which is able of being carried forward to subsequent tax years against which future taxable profits are able of being set off. The set-off of historic losses – in the form of an assessed loss – against existing taxable income has the obvious benefit of resulting in a reduced income tax charge against current and/or future taxable income generated from trade.

It is therefore quite common that such an assessed loss is assigned a determinable value (as a so-called ‘deferred tax asset’) as a secondary benefit when a company with an assessed loss is sold. However, it may happen that a potential purchaser of the shares in a company does so with the sole or main purpose to acquire the underlying assessed loss, and not necessarily the other assets that the company may own. For example, if a natural person were to incorporate his or her profitable business, it would be preferable to make use of a dormant company with a historic assessed loss, rather than incorporating a new company or make use of a shelf company. The established assessed loss can then be used to negate the income tax consequences that would otherwise have arisen from the business.

Section 103(2) of the Income Tax Act, 58 of 1962 (‘Income Tax Act’) has been designed to counter exactly this form of abuse if the utilization of an assessed loss is the sole or main purpose of a specific transaction. The provision applies whenever the South African Revenue Service (‘SARS’) is satisfied that any agreement affecting, or any change in the shareholding in, any company has been effected solely or mainly for purposes of utilizing an assessed loss of a company in order to avoid an income tax liability. Should these prerequisites be met, SARS has the power to disallow the setoff of any such assessed loss against any such income generated by the company.

Section 103(2) moreover does not only apply to taxable trading profits, but also where an assessed loss is used to negate capital gains tax exposure, or even where capital losses (as opposed to assessed income tax losses) are at stake. The provision also applies to trusts with assessed losses as much as it does to companies.

Finally, it is worth noting that section 103(2) may be used in the alternative to the general anti-avoidance rules (the so-called GAAR) contained in sections 80A to 80L of the Income Tax Act, and vice versa. It is arguable rather that the provisions of section 103(2) would be more difficult for the taxpayer to escape from, as (unlike the GAAR) it is not a prerequisite of this anti-avoidance measure that an element of ‘abnormality’ linked to the transaction in question also need to be illustrated for section 103(2) to apply.

Should I draft a will?

Posted on 17 of June, 2016 by BadenhorstOud in Will

A mother who has always wanted her daughter to inherit her diamond engagement ring may never get her wish if she dies without leaving a valid written will. The mother’s estate would then be distributed in terms of the Intestate Succession Act No. 81 of 1987.

Taking the time to draft a will can leave you with the peace of mind that your assets will be distributed according to your wishes as far as possible. Your will should reflect exactly how you want your assets to be dealt with after your death and should not be contra bonos mores (against good morals). It should also not amount to “ruling from the grave”.

There are a number of legal requirements that have to be complied with for a will to be valid. If it does not comply with all of these requirements it could be found to be invalid. Your estate would then also be dealt with in terms of the Intestate Succession Act of 1987. It is therefore of the utmost importance that you obtain the assistance of someone with the necessary specialised skill and knowledge to assist you with the drafting of your will.

A will should also regularly be revised and updated to adapt to your changing circumstances, for example after getting married, and when there is a child on the way. Section 2B of the Wills Act No. 7 of 1953 (as amended by the Law of Succession Act No. 43 of 1992) deals specifically with a change in marital status by way of divorce, and reads as follows:

“If any person dies within three months after his marriage was dissolved by a divorce or annulment by a competent court and that person executed a will before the date of such dissolution, that will shall be implemented in the same manner as it would have been implemented if his previous spouse had died before the date of the dissolution concerned, unless it appears from the will that the testator intended to benefit his previous spouse notwithstanding the dissolution of his marriage.”

This can be explained by way of the following example: A and B get divorced and B dies within three months of the date of the divorce. B’s will was executed before they got divorced. Unless B’s will specifically indicated that A must benefit from B’s estate despite the divorce, B’s estate will then be distributed as if A died before they got divorced. A will therefore not inherit from B’s estate in this scenario. However, should B die more than 3 months after the divorce and B’s will, which benefits A, was not changed, then it will be seen as if B intended A to inherit, despite the divorce.

A person who was previously married and who remarries, should ensure that the necessary changes are made to his/her will. If not, this could have profound consequences for the “new” spouse, especially if the will still benefits the spouse from the previous marriage.

When there are minor children in the picture, it is advisable to make adequate provision for their living costs and education in your will. This can be done by creating a testamentary trust of which the minor children can be beneficiaries.

Thinking and talking about one’s passing is not a pleasant subject. Having a valid, clear and unambiguous will can prevent unpleasant family feuds caused by them having to make decisions about the distribution of your estate. It is certainly worth the time and effort to have a valid written will in place.

References:

Drafting of Wills 2013 – LEAD

Intestate Succession Act 81/1987

Wills Act 7/1953

Are you a South African tax resident individual?

Posted on 17 of June, 2016 by BadenhorstOud in Tax

The question of tax residence for individuals has always been relevant in South Africa. It appears as though we find ourselves in a country which has always been a popular destination to which people from across the globe flock to set up businesses, but also a country from which people often travel for long-term stints overseas, or sometimes even permanent relocation.

The tax residence of individuals are important for people with ties to South Africa. South Africa charges tax resident individuals with income tax on their world-wide income, and non-tax resident individuals on their South African source income. The taxation of income from sources other than South Africa is therefore at stake here.

‘Tax residence’ is often confused with residence as would be applied for immigration purposes. It is very important to understand that tax residence is not determined by the passport that you hold. Rather, very different tests are applied.

In terms of the Income Tax Act, 58 of 1962, a person can be resident by virtue of being ‘ordinarily resident’ in South Africa, or by virtue of being physically present in the country for a predetermined amount of days.

‘Ordinarily resident’ is an undefined term in the Income Tax Act, but it refers to where a person’s ‘real’ home would be. Our courts have in the past explained that this would be ‘… the country to which [an individual] would naturally and as a matter of course return from his [or her] wanderings…’. (Cohen v CIR [1946] 13 SATC 362). Therefore, irrespective of whether one spends years in another country (and even acquire a passport there as a result), if one’s family and friends remain in South Africa, and the intention was always to return to South Africa at some stage and to settle here, it is quite possible that tax residence would have remained in South Africa throughout by virtue of the ‘ordinarily resident’ test.

The ‘physical presence test’ determines that, despite not being ‘ordinarily resident’ in South Africa, a person may still be considered South African tax resident if he/she spends enough time here. A person is considered to be a South African tax resident if he/she spends at least 91 days a year in the country, as well as 91 days in aggregate in each of the preceding 5 tax years. However, throughout this 5 year period, the person must have spent at least 915 days in South Africa in total. (A person would cease to meet the physical presence test if, after becoming resident, he/she spends 330 continuous days outside of South Africa.)

From the above, one would realise that it is quite possible for an individual to be considered resident for tax purposes in more than one country. This may potentially give rise to double taxation. South Africa has concluded numerous ‘double tax agreements’ with various countries across the world to cater for exactly this occurrence, and these treaties would include further criteria to determine in which of the two countries a person would be regarded as being tax resident to ensure that double taxation does not arise. This however, even more so than the domestic residence test explained above, may become quite involved.

Step by step guide to easy UIF claims

Posted on 11 of May, 2016 by BadenhorstOud in UIF

Alice recently lost her job. She is feeling very despondent since she has no income to provide for her family and cover her monthly expenses. She recalls that while she was employed she made monthly Unemployment Insurance Fund (UIF) contributions. However, Alice has no idea how to claim from the UIF and whether she qualifies as a claimant.

1. WHO CAN CLAIM FROM THE UIF?

All workers who contributed to the UIF can claim if they have been fired, if their contract has come to an end, or if their employer is bankrupt. Domestic workers who have more than one employer can claim if they lose their job with one of their employers or if an employer dies.

2. WHO CANNOT CLAIM?

Persons who resigned or quit their jobs
Persons who are suspended from claiming due to fraud
Persons who do not report at set dates and times
Persons who refuse training and advice that may be given by UIF staff
Persons who receive benefits from the Compensation Fund or from an Unemployment Fund established under the Labour Relations Act

3. WHEN CAN I CLAIM FROM THE UIF?

You can start claiming from the last day of employment until your UIF benefits are used up or you started working again. Your current contract must have expired before registering for UIF. Furthermore, you must claim within six months after your last day of employment.

4. HOW DO I REGISTER FOR UIF BENEFITS?

Unemployed workers must apply for UIF benefits in person at their nearest labour centre.

Step 1: Documentation

This step is of utmost importance if you want to claim your UIF successfully for the first time. It is important to have all the necessary documentation in order to avoid repeated trips to the labour centre. The required forms are available as PDF downloads at ezuif.co.za/uif-forms.

You need:

Your 13-digit bar-coded ID or passport
UI-2.8 for banking details (Note that this needs to be signed by your bank and be accompanied by a stamped bank statement to confirm your bank account details.)
Form UI-19 to show employment history. This form is to be filled in by your previous employer. (Note that the Labour Department will check your last four years of work history to calculate your UIF benefit amount. Make sure you have all necessary declarations from previous employers dating back four years. If an employer has failed to issue you with a declaration, he must also fill out a UI-19 form.)
A workseeker form
Last two pay slips

Step 2: Go to the nearest labour centre

Once you have all the documents, go to the nearest labour centre. You can find the address and telephone number of your nearest centre at http://www.labour.gov.za/contacts/contacts. Note that the average waiting period at the labour centre can be anything from two to six hours, so make sure you have enough time. There is a slight chance that the staff at the labour centre may ask unemployed workers to go for training or advice – this is within their rights and you will have to take their advice.

5. HOW WILL I BE PAID?

Once you have registered for UIF benefits the staff at the labour centre will issue you with a UIF checklist. On this checklist you will find the address of the venue where you must sign for payment, as well as the date and time for your attendance.

Step 1: Go to the signing venue

You must appear at the designated venue on the date and time stipulated in order to sign for your first UIF payment. It is important to be on time. Take the UIF checklist and your ID document with you.

Step 2: Sign the unemployment register and receive UI-6A forms

If you have successfully registered for UIF, your name will be read out from a list. You will be required to sign a register to mark your attendance and confirm that you are still unemployed. Collect all the UI-6A forms (one for each future signing). Keep all these documents in a safe place as you will need them every time you are due for a UIF payment. This whole process can take up to three hours. Your first payment will be paid into your bank account within two to four days after you have signed the register.

Step 3: Note your next signing date

Make sure you are aware of your future signing dates – they are printed on your UI-6A forms. Signing dates will be approximately four weeks apart. You will have to hand in the relevant UI-6A form every time you attend, so make sure you have it with you. Note that your application may be delayed and not yet processed by the date of your first signing. It is recommended that you call the relevant labour centre the day before going to the signing venue to ensure that your application has been processed. If your application has not yet been processed you do not need to go to the signing. Ask for the date of the next signing.

6. HOW MUCH WILL I BE PAID?

The amount that you will be paid will depend on the amount of your monthly salary when you were employed.

Workers will receive approximately 36-56% of their average monthly salary for the previous four years (which is capped at a maximum amount though) and on the basis of the higher the salary, the lower the percentage.

How long you will be eligible to receive UIF payments depends on the length of time that you have contributed to the fund. You are eligible to receive one day's worth of benefits for every six days that you had worked and contributed to the UIF over the previous four years. The maximum number of days you can claim for is 238.

Note: You can calculate your UIF monthly payments by using the EZUIF calculator provided at: http://ezuif.co.za/2012-uif-benefits-calculator/

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 ommissions 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)

Tips to get the most out of your short term insurance

Posted on 11 of May, 2016 by BadenhorstOud in Insurance

We take out short term insurance for peace of mind. You pay your premiums regularly and feel safe because you know you are covered should any of your insured assets become damaged. But do you really have the insurance cover you think you have? Are you sure you will be able to claim if your assets should get damaged?

If you pay short term insurance premiums, you want to get the best value for your money and protect yourself against nasty surprises when you need to make a claim. By taking out short term insurance, you undertake to fulfil certain requirements in exchange for insurance cover. If you do not fulfil these requirements, you may not be able to claim for damages against your insurance policy.

Application tips

When you apply for insurance, the insurance company or broker must give you the following information:

Proof that they are licensed under the FAIS Act;
Policy details: contact details of the insurer, exactly what is covered and excluded, amount of your premium, whether your premium increases automatically every year or not, how to claim; and
Inform you that if you pay your premiums late, you will still be insured as long as you pay the outstanding premiums within 15 days. If you pay after the 15th day, you will have no insurance cover.

If you apply through a call centre, ask for the transcript of your phone call for your records.

Make sure you give accurate information. If it’s not accurate, it is false information, even if you thought it was the correct information.

Make sure you play open cards. If you are not sure whether the insurer needs certain information, ask them. By keeping quiet, you also give inaccurate and false information.

After the application

Motor vehicle insurance is only valid if your vehicle is roadworthy. The responsibility rests on you to check your insured vehicle regularly to ensure that it stays roadworthy e.g. make sure there is enough tread on the tyres as required by law. Also, remember to contact your insurer at least once a year to reduce the insured value of your vehicle as motor vehicles’ value normally decline over time. By reducing the insured value, you will save on premiums and avoid being over-insured.

Household content insurance covers everything inside your house. House contents are normally insured at replacement value. As the price of furniture, clothing, etc. increases over time, you need to contact your insurer periodically to adjust the replacement value of your home’s contents to prevent becoming under-insured.

Home owners insurance covers the physical structure (building) of your house. Property is normally insured at the rebuilding value of the structure. Take note that the rebuilding value of a property is usually lower than its market value. Any cost incurred to maintain the building’s structure is generally not covered by insurance. An insured property owner must do adequate maintenance on the property. If a property owner neglects to do the necessary maintenance and consequently suffers a loss, he/she will not be able to claim from the insurer for damage suffered as a result of inadequate maintenance. As most properties’ rebuilding value increase over time, you need to contact your insurer from time to time to increase the insured value of your house.

All risks insurance covers movable items that are taken out of the house e.g. cell phones. Most policies have a claim limit up to which movable items don’t have to be specified in your insurance policy. Any claim for an item with a value above the limit will only be considered if the item was specified by informing your insurer about any identifiable details of the item which can help to identify that item e.g. the brand, colour or serial number.

To enjoy maximum protection under your short term insurance policy, you need to do three things. Firstly, pay your premiums on time. Secondly, maintain insured assets as agreed with the insurer. Lastly, periodically assess whether the insured value of assets covered by your insurance policy, is still reasonable. If there are material changes in the replacement value of any of these assets, instruct your insurer to adjust the insured value of such assets. If you do these three things, you can have the peace of mind that you have maximum protection under your short term insurance policy.

Reference List

Accessed on 18 September 2015:

SAIA Consumer Education Booklet written by Denis Beckitt

Die implikasies van boedelbelasting

Posted on 11 of May, 2016 by BadenhorstOud in Boedel

Boedelbelasting word, kragtens die Wet op Boedelbelasting, gehef op die belasbare waarde van die boedel. Die algemene reël is dat indien die belastingbetaler gewoonlik in Suid-Afrika woonagtig is ten tye van sy/haar dood, al die bates (insluitend eiendom geag eiendom te wees), waar ook al geleë, ingesluit sal word in die brutowaarde van die boedel vir die bepaling van die boedelbelasting daarop betaalbaar.

Tans bedra boedelbelasting 20% van die belasbare waarde van die boedel. Buitelanders/nie-inwoners betaal ook boedelbelasting op hulle eiendom in Suid-Afrika.

Om die gevolge van boedelbelasting te minimaliseer, moet ‘n mens die berekening daarvan verstaan. Die volgende is van toepassing in die bepaling van jou aanspreeklikheid:

Watter eiendom ingesluit moet word.
Watter eiendom “geagte eiendom” is.
Toelaatbare aftrekkings: die moontlike aftrekkings wat toegelaat word by die bereddering van die boedel.

Eiendom sluit in alle eiendom of enige reg op eiendom, inbegrepe roerende of onroerende, liggaamlike of onliggaamlike eiendom wat geregistreer is in die oorledene se naam tydens sy/haar dood. Dit sluit ook sekere tipes annuïteite, opsies om grond of aandele te koop, welwillendheid en intellektuele eiendom in.

Geagte eiendom

1. Versekeringspolisse

1. i) Sluit opbrengste in van binnelandse versekeringspolisse (betaalbaar in Suid-Afrika in die Suid-Afrikaanse geldeenheid [ZAR]), uitgeneem op die lewe van die oorledene, ongeag wie die eienaar (begunstigde) is.

ii) Die opbrengs van % , die begunstigde) wat die belastingdoeleindes nie.

iii) As die opbrengs van ‘n polis betaalbaar is aan die langslewende eggenoot of aan ‘n kind van die oorledene kragtens ‘n behoorlik geregistreerde huweliksvoorwaardekontrak (d.w.s. geregistreer by die Aktekantoor) sal die polis geheel en al vrygestel wees van boedelbelasting.

iv) Waar ‘n polis deur besigheidsvennote uitgeneem word op mekaar se lewens en daar aan sekere kriteria voldoen word, word die opbrengs van boedelbelasting vrygestel.

2. Voordele betaalbaar deur pensioen- en ander fondse deur of as gevolg van die dood van die oorledene

Betalings deur sodanige fondse (pensioen-, aftree-annuïteit-, voorsorgfondse) bestaan gewoonlik uit twee komponente – ‘n enkelbedrag by die dood en ‘n annuïteit daarna. Die enkelbedragkomponent was vroeër onderhewig aan boedelbelasting, maar vanaf 1 Januarie 2009 word geen bedrag wat ontvang is van so ‘n fonds ingesluit by die boedel van die oorledene vir boedelbelastingdoeleindes nie.

3. Skenkings ten tye van dood

Skenkings waar die begunstigde nie sal baat tot en met die afsterwe van die skenker nie, en waar die skenking slegs realiseer as die skenker te sterwe kom, is nie onderworpe aan skenkingsbelasting nie. Dit moet ingesluit word as ‘n bate in die oorledene se boedel en is onderhewig aan boedelbelasting.

4. Eise kragtens die Wet op Huweliksgoedere (aanwas-eise)

‘n Aanwas-eis wat die boedel van ‘n oorledene teen die langslewende gade het, is eiendom geag eiendom te wees in die oorledene se boedel.

5. Eiendom wat die oorledene by magte was om te vervreem onmiddellik voor sy dood (Artikel 3(3)(d) van die Wet op Boedelbelasting), soos byvoorbeeld om ‘n bate aan ‘n trust te skenk, kan beskou word geagte eiendom te wees.

Aftrekkings

Sommige van die belangrikste toelaatbare aftrekkings is die volgende:

Die koste van die begrafnis, grafsteen en sterfbeduitgawes.
Skulde wat op datum van afsterwe verskuldig is aan persone wat primêr woonagtig is in Suid-Afrika.
Die mate waarin hierdie skulde vereffen moet word uit eiendom ingesluit in die boedel. Dit sluit in die oorledene se inkomstebelasting betaalbaar (ook kapitaalwinsbelasting) tot en met datum van afsterwe.
Buitelandse bates en regte:

Die algemene reël is dat buitelandse bates en regte van ‘n Suid-Afrikaanse burger, waar ook al geleë, as ‘n bate by sy boedel ingesluit is.

Die waarde daarvan kan egter afgetrek word vir boedelbelastingdoeleindes waar sodanige buitelandse eiendom verkry is voor die oorledene vir die eerste keer gewoonlik woonagtig in Suid-Afrika geword het, of die eiendom bekom is by wyse van skenking of erflating van ‘n nie-burger nadat die begunstigde vir die eerste keer gewoonlik woonagtig in Suid-Afrika geword het (met dien verstande dat die skenker of erflater nie gewoonlik woonagtig in Suid-Afrika was ten tye van die skenking of dood nie). Die bedrag van enige winste of opbrengs van enige sodanige eiendom is ook aftrekbaar.

1. Skulde en laste verskuldig aan nie-inwoners:

Skulde en laste verskuldig aan nie-inwoners is aftrekbaar, maar slegs in die mate wat sodanige skuld die waarde van die oorledene se bates geleë buite Suid-Afrika wat nie in die belasbare boedel ingesluit is nie, oorskry.

2. Bemakings aan sekere openbare weldaadorganisasies:

Waar eiendom bemaak is aan openbare weldaad- of welsynsorganisasies wat vrygestel is van inkomstebelasting, of aan die Staat of enige plaaslike owerheid in Suid-Afrika, sal die waarde van sulke eiendom van boedelbelasting afgetrek kan word.

3. Eiendom bemaak aan langslewende gade [Artikel 4(q)]:

Dit sluit in daardie deel van die waarde van die eiendom wat aan die langslewende gade bemaak is en wat nog nie as ‘n aftrekking toegelaat is nie.
Let daarop dat die opbrengs van ‘n polis betaalbaar aan die langslewende gade, as geagte eiendom in die boedel ingesluit word vir boedelbelastingdoeleindes, maar dat dit aftrekbaar is kragtens Artikel 4(q).
Artikel 4(q)-aftrekkings sal nie toegestaan word waar die eiendom wat geërf is onderhewig is aan ‘n erflatingsprys nie.
Artikel 4(q)-aftrekkings sal nie toegestaan word waar die bemaking is aan ‘n trust wat tot die voordeel van die langslewende gade geskep is, indien die trustee(s) ‘n diskresie het om sodanige eiendom of enige inkomste daaruit aan enige ander persoon buiten die langslewende gade te allokeer nie (‘n diskresionêre trust). Waar die trustee(s) geen diskresie met betrekking tot beide die inkomste en kapitaal van die trust het nie, kan die Artikel 4(q)-aftrekking toegestaan word (‘n gevestigde trust).

Toelaatbare R 3.5 miljoen-afrekking tussen gades

Die Wet maak voorsiening dat die R3.5 miljoen-aftrekking van boedelbelasting van die oorledene verplaas kan word na die langslewende gade sodat die langslewende gade ‘n R7 miljoen-aftrekking kan gebruik by sy/haar dood. Die verplaasbaarheid van die aftrekking is slegs van toepassing as die hele waarde van die boedel van die eerssterwende gade nagelaat is aan die langslewende gade.

Lewensversekering vir boedelbelasting

Boedelbelasting sal normaalweg ook gehef word op hierdie versekeringsopbrengste.

Bron: Moore Stephens se “Estate Planning Guide”.

Hierdie artikel is ŉ algemene inligtingsblad en moet nie as professionele advies beskou word nie. Geen verantwoordelikheid word aanvaar vir enige foute, verlies of skade wat ondervind word as gevolg van die gebruik van die artikel nie. Kontak altyd ŉ finansiële raadgewer vir spesifieke en gedetailleerde raad. (E&OE)

Begrotings: Is dit die moeite werd?

Posted on 11 of May, 2016 by BadenhorstOud in Begrotings

Baie klein besighede word deur die eienaar self bestuur, veral aanvanklik wanneer die besigheid op sy voete kom. Aangesien die eienaar intiem betrokke is by die dag tot dag verloop van sake is dit maklik om beheer oor die uitgawes uit te oefen. Soos die besigheid egter groei, mag dit nodig word om werknemers aan te stel om hom te ondersteun in die bestuur van die besigheid.

Dit is onvermydelik dat die dag sal aanbreek wat die eienaar sekere finansiële pligte aan werknemers moet delegeer en hulle moet vertrou met die taak om die besigheid se fondse met verantwoordelikheid te bestuur. Dit is waar ‘n begroting en die begrotingsproses van onskatbare waarde kan wees.

Eenvoudig gestel is ‘n begroting ‘n finansiële plan vir ‘n sekere periode in die toekoms, gebaseer op ‘n kombinasie van die huidige finansiële posisie en ‘n projeksie van verwagte inkomste en uitgawes vir gemelde tydperk. Deur ‘n besigheid se inkomste, uitgawes en finansiële doelwitte in een plan te kombineer, kan ‘n duidelike prentjie gevorm word van waar die besigheid is in finansiële terme en hoe om te werk te gaan om die gestelde doelwitte te bereik.

Wanneer ‘n begroting opgetrek word, is dit nodig dat die eienaar en/of bestuur doelwitte vir die besigheid stel en beplan hoe om dit te finansier. Indien daar meer as een doelwit is, moet die doelwitte geprioritiseer word om vas te stel watter doelwit(te) die fokuspunt sal wees tydens die tydperk van die begroting.

‘n Deeglike begroting behoort te verseker dat die besigheid genoeg kapitaal beskikbaar het wanneer dit benodig word vir groot uitgawes soos om duur toerusting te vervang of nuwe besigheidsinisiatiewe na te volg. Deur die finansiële implikasies van toekomstige groei en uitbreiding in die begroting in te sluit, kan verseker word dat die besigheid kapitaal beskikbaar het wanneer vinnige besluite geneem moet word rakende geleenthede om die besigheid uit te brei.

‘n Begroting kan u help om vooruit te beplan wanneer u geld sal nodig hê en watter bedrag, sodat krisisse weens ‘n tekort aan fondse voorkom kan word. Dit is veral belangrik vir besighede met seisoenale besigheidsiklusse om ‘n veiligheidsnet te hê vir die maande wanneer daar min besigheid is.

‘n Begroting dien as ‘n gids om begrip by werknemers te kweek vir die prioriteite wat die eienaar vir die besigheid stel. ‘n Begroting sal tipies doelwitte vir inkomste en uitgawes vir elke departement of kostesentrum stel. Dit is egter belangrik dat die doelwitte realisties en haalbaar is, en dat elke bestuurder bewus is van wat die eienaar se verwagtings vir die tydperk van die begroting is.

Tydens die opstel van die begroting word elke uitgawe onder die vergrootglas geplaas. Dit is die ideale geleentheid om vas te stel watter uitgawes noodsaaklik is en watter uitgeskakel kan word.

‘n Begroting kan die bestuur van hulp wees in die beheer van uitgawes deur grense vas te stel, sodat spandering wat nie in ooreenkoms is met die toekomstige sakeplanne nie, ingekort kan word. Deur spandering aan onbeplande uitgawes in te kort, kan verseker word dat geld aan die belangrike areas gespandeer word.

Wanneer ‘n begroting opgetrek is, kan die eienaar en bestuur hul vordering en prestasie aan die begroting meet. Indien bevind word dat hulle van die syfers wat begroot is, afgewyk het, kan hulle die gepaste stappe neem of, indien die begroting onrealisties was, sal die begroting moontlik aangepas moet word. ‘n Begroting is ‘n buigsame instrument wat aangepas kan word indien dit nie werk nie of indien die omstandighede waarop die begroting gebaseer is, verander.

Omdat marktoestande, tegnologie en indiensnemingsvereistes voortdurend verander, sal ‘n begroting gereeld hersien moet word ten einde van waarde te wees.

Kennis is mag en om ‘n begroting op te stel, sal aan die eienaar gedetailleerde inligting rakende sy besigheid se huidige posisie, potensiële bestemmings en moontlike finansiering vir die roete vanaf die huidige posisie tot by die eindpunt verskaf. Die vraag wat in die opskrif gestel word, naamlik of begrotings die moeite werd is, kan dus met ‘n luide “Ja!” beantwoord word.

Verwysingslys:

Tax rates announced in the budget

Posted on 25 of April, 2016 by BadenhorstOud in Tax

On 24 February 2016, Min. Pravin Gordhan tabled National Treasury’s annual budget. While it contained a few surprises (both for what it said and that which it did not), the focus in studying the budget has always been the new tax rates proposed.

Below we set out the new rates that will apply going forward. The two most significant changes are the increase in the capital gains tax inclusion rate, as well as the introduction of yet another transfer duty scale for properties purchased with a value in excess of R10 million.

It is important to note that although not approved by Parliament as yet, the below rates are unlikely to be changed.

Income tax rates for individuals for the 2016/2017 tax year:

Taxable income (R)	Rates of tax (R)
0 – 188 000	18% of each R1
188 001 – 293 600	33 840 26% of the amount above 188 000
293 601 – 406 400	61 296 31% of the amount above 293 600
406 401 – 550 100	96 264 36% of the amount above 406 400
550 101 – 701 300	147 996 39% of the amount above 550 100
701 301 and above	206 964 41% of the amount above 701 300

Interest Exemptions from Income Tax (unchanged):

	2017
Person younger than 65	R23 800
Person 65 and older	R34 500

Medical credits available to be deducted against an income tax liability:

Per month 2017For the taxpayer who paid the medical scheme contributions R286For the first dependant R286For each additional dependant(s) R192

The following rebates will apply for individuals against their tax liability calculated in accordance with the above:

Cumulative Rebates from Income Tax for Individuals:

Tax Rebate
Primary	R13 500
Secondary (65 and older) (unchanged)	R7 407
Tertiary (75 and older) (unchanged)	R2 466

Income Tax for companies is still levied at 28%, whilst the rate is retained at 41% for trusts.

Small Business Corporations are not taxed at a flat rate of 28%, but according to the below table for tax years ending between 1 April 2016 and 31 March 2017:

Taxable income (R)	Rate of tax (R)
0 – 75 000	0%
75 001 – 365 000	7% of the amount above 73 650
365 001 – 550 000	20 395 21% of the amount above 365 000
550 001 and above	59 150 28% of the amount above 550 000

Capital gains tax is calculated by including 40% (previously 33.3%) of an individual’s net capital gains (less R40,000) in their taxable income to be used for calculating their income tax liability (see table above). The inclusion rate for ordinary trusts and companies are increased to 80% (previously set at 66.6%).

The VAT rate has been retained at 14%. The same applies to donations tax and estate duty, both still levied at 20%.

Transfer duty applicable to individuals:

Value of the property (R)	Rate
0 – 750 000	0%
750 001 – 1 250 000	3% of the value above 750 000
1 250 001 – 1 750 000	15 000 6% of the value above 1 250 000
1 750 001 – 2 250 000	45 000 8% of the value above 1 750 000
2 250 001 – 10 000 000	85 000 11% of the value above 2 250 000
10 000 001 and above	R937,500 13% of the value exceeding R10 000 000

Turnover tax rates:

Taxable turnover (R)	Rate of tax (R)
0 – 335 000	0%
335 001 – 500 000	1% of the amount above 335 000
500 001 – 750 000	1650 2% of the amount above 500 000
750 001 and above	6 650 3% of the amount above 750 000

So what is gap cover all about

Posted on 25 of April, 2016 by BadenhorstOud in Financial

Something that is a frequent question by consumers is “Why did my medical aid not cover the full cost of my hospitalization?” Thinking they were covered for 100% of all the hospitalization costs. Medical aid can be a minefield for the regular Jane out there, who is just looking for the peace of mind that her medical aid will cover her adequately in all circumstances. All Jane wants to know is, as long as she pays her medical aid contributions, she will be covered in the event of a catastrophe, such as a car accident, as well as all her normal day-to-day expenses at a healthcare provider. She definitely does not want to become bankrupt over additional costs she becomes aware of only once she has been discharged from hospital, costs which she can ill afford, and which are likely to put her back in hospital due to the financial stress she is now placed under.

In South Africa, medical schemes have different options from which you can choose, and these options vary in the benefits offered, and of course also the cost of the contributions. When choosing a medical aid option, you will see that professional services (such as the surgeons or anesthetists) in hospital will be reimbursed at either 100%, 200% or 300% of the scheme rate. Anyone will be forgiven for assuming that being covered at 100% means exactly that – you are fully covered! However, specialists in South Africa are not currently regulated as to what they can charge patients for their services, and could charge in excess of the 100% rate which medical schemes are willing to pay, sometimes as much as 500% of the scheme rate. The end result is that the patient ends up with a shortfall on the specialist’s account, which has to be paid out of his pocket.

To give an example of how significant these costs could be, have a look at this example of the cost of different procedures:

Procedure

Cost

Medical Aid Payout

Shortfall

Gap Claim

Appendectomy

R3 441.46

R1 388.20

R2 053.26

Caesarean Section

R12 605.86

R4 192.10

R8 413.76

Coronary Bypass

R40 751.80

R13 587.60

R27 164.20

Hysterectomy

R12 977.80

R4 751.00

R8 226.80

Tonsillectomy

R12 297.70

R4 119.91

R8 177.79

Wisdom Teeth Removal

R6 260.00

R1 958.50

R4 301.50

From the above, you see that one can easily have a gap in cover between what is actually charged and what the medical aid is willing to pay for the specialist for the procedure. This is an expense you did not perhaps consider when joining the medical aid, as you mistakenly believed you were fully covered for hospital expenses.

So how does gap cover work?

Gap cover does not form part of your medical scheme membership. In fact, it is not even regulated by the same laws. Medical schemes are regulated by the Council for Medical Schemes, and the Medical Schemes Act, while gap cover falls under the Short-term Insurance Act.

Although there is an on-going debate between government and the different stakeholders as to whether gap cover products are in fact doing the business of a medical scheme, this matter has not yet been resolved, and for now, gap cover products are still available to the public. The value of having gap cover cannot be stressed enough, even for members of medical scheme options that pay at 300% of the scheme rate. Claims experience by the gap cover providers show that specialists often charge above 300% of scheme rates. Although government has published draft regulations to prohibit the marketing of these products, because of the on-going debate, these products are still being marketed and their value is clearly self-evident

While your medical aid will reimburse the hospital or specialist directly when you are hospitalized, because of the regulatory issues, gap cover providers will refund you, the member, directly. It is then your responsibility to reimburse the service provider. The process of claiming is also separate from your medical scheme. Usually, a gap cover claim must be submitted after your medical scheme has paid the service provider. Having a gap policy is also not dependant on a specific medical scheme. You can change medical schemes, but still keep the same Gap cover.

Often downgrading your medical aid option from one that pays a higher scheme rate to one that pays a lower rate and getting gap cover to ensure full payment of specialists is a consideration for consumers, but that may not always be wise as there may be other benefits that you are forgoing on. You should only downgrade your medical scheme option after obtaining advice from your financial advisor, who is accredited to give advice on your specific circumstances.