With proposed Tax changes to Trusts, are they still worth while?

A2_bProposed tax changes by the Davis Tax Commission are threatening the taxation of trusts and people are starting to wonder if they should move assets out of trusts and if they should still consider a trust in their financial planning at all. Some fundamentals around these entities should be carefully considered before making rash decisions or disregarding the possibility of using a trust at all.

The Davis Tax Commission recently released an interim report to highlight some of their proposals with regard to the wide term of “wealth tax” that they were mandated, amongst others, to investigate and consider. Within this consideration the taxation of trusts was looked at in more detail and some relatively drastic proposals have been made in this regard.

The question has therefore been raised whether trusts still have any use at all and therefore one should not necessarily discuss the proposed changes but look at some fundamentals around trust that remain. Some of these may be affected by legislation and case law, but other are relatively fixed benefits.

What are the fixed benefits?

These benefits are core and fundamental to the reasons and purpose of establishing a trust and have been around in law for many decades. One of these is that trusts ensure the smooth hand over of assets, known as inter-generational wealth transfer. When an individual passes away, assets owned by the deceased, must be dealt with by the executor of their estate. Only once the executor has dealt with the deceased estate can the assets be passed on to the heirs. This is a time consuming exercise and in some circumstances can place the surviving spouse in a financial predicament. Assets that are owned by a trust do not form part of the deceased’s estate, which means that the surviving spouse or children can still access assets (including funds) whilst the estate is being wound up. The fact that the assets are owned by the trust significantly simplifies the winding up of the estate.

Furthermore trust also allow for the protection and management of assets for persons that are unable to or unwilling to manage these themselves. Children under the age of eighteen may not inherit directly from anyone, which means that either the assets must be sold and the funds transferred to the guardians fund (a government institution) or alternatively they must be held in trust until the child reaches the age majority (or any age above the age of majority determined and specified by the deceased in their will). People with mental conditions are unable to look after themselves, specifically in respect of their financial affairs, their initial caregivers may also not be around forever and therefore special trusts can be set up to ensure the needs of people suffering from mental conditions are taken care of.

By transferring assets to a trust during your lifetime will ensure a solution to the abovementioned situations where individuals, irrespective of their age, are unable to administer and manage their own financial affairs. Carefully selected trustees can then continue to manage these assets for the nominated and selected beneficiaries.

What are the variable benefits?

Tax benefits are variable and as is evident from the Davis Commission proposals these will change from time to time. Although most people want to know the tax benefits of trusts what should be kept in mind is that nothing should ever really be done for tax benefits that may exist at any time and point because tax laws change yearly in South Africa. However, even with the proposed changes to the taxation of trusts there are a couple which remain, but once again these are mainly aimed at long term estate planning and result in individuals saving on some taxes in the event of death.

Death triggers a capital gains (CGT) event and therefore you will have to pay CGT in your estate on certain assets. If however these assets are held in trust this will not be the case. This ensures a tax saving in your estate and also ensures that you don’t have a liquidity problem as a result of the taxes payable. The same goes for estate duty in the event that this would be payable, as assets held in trust do not form part of your estate. You will also save on the executor’s fee, as the executor of your personal estate will not handle any assets held in trust.

By holding assets in trust you are also afforded creditor protection as assets held in trust do not form part of an insolvent’s estate and hence cannot be attached. Section 12 of the Trust Property Control Act states; “Separate position of trust property – Trust property shall not form part of the personal estate of the trustee except in so far as he as trust beneficiary is entitled to the trust property”. This should not be seen as blanket protection as there are a number of situations where due to bad trust administration the courts have made decisions to include trust property in the personal estate of individuals.

Trusts are therefore still a good planning tool to consider, regardless of proposed changes to their taxation and there are still fixed and variable benefits afforded to them. So don’t discard them anytime soon.

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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Transfer of a property: is VAT or Transfer Duty payable?

A1_bA 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.


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:

  1. The first R750 000 of the value of the property is exempted from transfer duty.
  2. Thereafter transfer duty is levied at 3% of the value of the property between R750 000 and R1 250 000.
  3. 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.
  4. 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.
  5. 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.


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)

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Passive income and SARS

A2_bHave you ever investigated passive income opportunities to earn extra money? Did you consider the effect that earning additional income might have on your current income tax liability? If your income increases, whether from a passive income source or otherwise, SARS will soon come to the party to claim its share of your profits. Do you know what the effect of earning passive income might be on your present tax situation? If not, do read the rest of this article.

What is passive income?

Passive income is money you earn now which you didn’t have to work for now. However, you did work for it when you set up your source of passive income in the past.

If you set up your passive income source correctly, it will continue to generate income with either a minimum or no presence from you as the business owner. That’s what makes passive income so attractive: there’s no direct link between the number of hours you work and/or must be present in the business, and the amount of money you can make.

Provisional tax considerations

A taxpayer will not be required to submit provisional tax returns if his/her only source of income is remuneration from their employer and the employer deducts PAYE on a monthly basis from such remuneration.

PAYE can only be deducted by an employer from remuneration paid to its employees. If you earn passive income which is not subject to PAYE, you will have to submit provisional tax returns. Provisional tax is calculated on the estimated taxable income for a specific tax year. Please consult your tax adviser for advice regarding any potential provisional tax obligations.

Income tax considerations

As with any type of business income, passive income will be subject to income tax. SARS will allow a taxpayer to deduct the expenses incurred in generating the passive income, provided that the expenses are tax deductible in terms of income tax legislation. A taxpayer earning passive income will thus be taxed on the resulting profit (passive income less expenses incurred to generate that passive income).

For an expense to be tax deductible against passive income, it must fulfil all the following requirements:

  • It must have been actually incurred (i.e. the expense must either have been paid already or be due and payable);
  • In the carrying on of any trade;
  • In the production of passive income (there must be a link between the expenditure and the passive income); and
  • Not be of a capital nature (i.e. the expense must not give rise to an enduring/long term benefit).

If you are not sure whether an expense will be tax deductible and/or at which amount, please consult your tax adviser for advice.

Dual-purpose expenses (i.e. expenses that were incurred both for business and private purposes at the same time) may be apportioned according to the ratio of the business-related portion to the total amount of the expense. Only the business-related portion of the total expense will be tax deductible.

The profit you earn as a result of your passive income venture will be added to your taxable income for a specific tax year. If you already earn income from another source (e.g. salary/wages), that income and the profit from passive income will be added together to determine your taxable income. Taxable income will thus increase, which might put you into a higher tax bracket with a higher tax percentage.

To avoid nasty surprises it is important to consider the income tax implications of a passive income opportunity before taking advantage of such an opportunity. Although the figures you use for the calculations will be estimates and might not be that accurate, it’s still better to do some semi-accurate calculations than no calculations at all.

Reference List:

Accessed on 3 September 2015:

Accessed on 9 September 2015:

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. (E&OE)

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Red flags: financial reasons why small businesses fail

A1_bMany people dream of starting their own business. Few of the dreamers get as far as actually starting a business. Even fewer of the businesses survive in the long-term. Too often small businesses fail due to reasons, financial and otherwise, that could have been managed or altogether avoided. Continue reading to see if you recognise any of these red flags in your business.

Lack of financial skills, financial planning and financial management

Have you done any financial forecasts for your business? Never?

Do you control spending with a budget?

Do you know how much income (revenue) and profit (no, they are not the same thing) you are making on each transaction? Are you focused on the products that generate the most profit?

Are you aware of the cycles (e.g. seasonal cycles) in the business sector you operate in and do you plan your cash flow according to the effect these cycles will have on your income and expenses?

If you answered “No” to any of the above questions, that could be a red flag popping up.

Not enough cash reserves/savings

The minute any business starts to struggle with cash flow, a red flag immediately goes up because no cash means no business.

Something bad or unforeseen is bound to happen to your business from time to time – that’s life. The question is, when it happens, is there enough cash available to recover from the setback or challenge? No? There’s that red flag popping up again.

Some other sources of potential cash flow problems worth looking into are:

  • Falling behind on payments of day-to-day expenses e.g. suppliers, rent.
  • Borrowing money without a realistic plan or the means of repaying it.
  • Paying suppliers COD but selling to clients on credit. Does your business have enough cash reserves to pay suppliers immediately and wait for payment from your clients for possibly more than a month? Ideally the business should be able to pay suppliers on time and coordinate these payments with cash inflows from clients.
  • Uncontrolled personal use of business money – in other words: raiding the business’s cash register whenever you need money for private purposes

Poor accounting

You can’t control and manage your business if you don’t know what’s going on with the finances. Business decisions need to be based on accurate, up-to-date financial information otherwise you are flying your business blindfolded. Remember: you can’t manage what you can’t measure.

Lack of awareness of the relationship between different functions of a business

Consider the following statement: Without money there is no business and without business there is no money. Or to put it differently: If you neglect sales, there will be no money flowing into the business and if you neglect managing the money, you will not be able to pay for the products or services you need to generate sales.

There is a fairy tale idea that an established business will just run itself. If there were any truth to this idea, there would have been a lot less small businesses going out of business or failing for various reasons. If you want to ensure that your small business will thrive now and in the future, there are certain things you have to do. It is never too late to start doing cash flow planning or draw up a budget. Remember that even a mature plant needs to be watered so keep those forecasts rolling!

If the above article raised any questions in your mind or you need professional guidance on this topic, please do not hesitate to contact a business consultant who can assist you in the planning of your business.











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. (E&OE)

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Tax free investment savings accounts

A2BOur clients will have noted the various advertisements on radio and in the media generally of financial service providers inviting the public to invest in their respective so-called ‘tax free savings’ investment products. These accounts are made possible by section 12T of the Income Tax Act, 58 of 1962, introduced in 2015 as an initiative by National Treasury to encourage a savings culture in the South African public through making use of these predetermined and specific income tax concessions linked to these accounts.

In essence, all amounts received from tax free savings are exempt from income tax and specifically:

• Dividends paid to such accounts will not attract dividends tax;

•  Realisation of assets in tax free savings accounts will not give rise to capital gains or losses (and are thus effectively exempt from the capital gains tax regime); and

•  Any amounts received will be exempt from income tax.

The tax free savings regime however only applies to natural persons and deceased estates of persons who had during their lives contributed amounts towards these ‘tax free savings’ accounts. The regime is therefore not available to companies or trusts. Contributions to such accounts are limited though to R30,000 annually as well as a total of R500,000 during a person’s lifetime. Where these amounts are exceeded, the excess amount shall be deemed to be taxable income of the contributing individual, and which is prescribed to be taxed at 40%. (Interestingly, this amount appears to have been overlooked by the Legislature when it recently increased the maximum marginal income tax rates of individuals from 40% to 41%…) This is quite an onerous provision, and care should thus be taken that these amounts are not breached by individuals contributing to these tax free savings. Transfers between tax free savings accounts by an individual are however not included in the R30,000 or R500,000 limitations, as well as any income received from tax free savings capital. The limitations therefore only apply to new capital being introduced into an individual’s tax free savings viewed cumulatively.

It is questionable whether the initiative goes far enough and is as lucrative as may seem at first blush. Natural person taxpayers will be reminded that they are already afforded an annual R30,000 effective rebate from capital gains tax (the first R30,000 of capital gains/losses realised in a tax year is ignored for capital gains tax purposes), and further that an annual interest exemption of R23,800 (R34,500 in the case of individuals older than 65) applies notwithstanding the section 12T concessions.

When taking into account that financial products perceived as conservative are typically those approved by the Financial Services Board as ‘tax free investment savings accounts’, it does not naturally follow that after-tax profits from tax free savings will necessarily exceed savings in the conventional form.

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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Are you a South African tax resident individual?

A1BThe 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.

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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2016 Budget Speech summary

A2BThe Minister of Finance tabled National Treasury’s annual budget in Parliament on the 24th of February 2016.  Below some of the more significant tax related matters to take note of which have been proposed: 

  • Capital gains tax inclusion rates are increased from 33.3% (individuals) and 66.6% (companies and trusts) to 40% and 80% respectively;
  • Rates for VAT, Corporate Income Tax, Estate Duty and Securities Transfer Tax remain unchanged;
  • Personal income tax relief has been announced for individuals across the board. In an unexpected move this will also be the case for wealthier individuals.  An individual below the age of 65 would for example have paid income tax of R522,796 on taxable income of R1.5 million.  For 2017, the same amount would attract tax amounting to R520,930;
  • Treasury is considering the introduction of legislation later this year to, for estate duty purposes, potentially include assets in an individual’s estate which he/she had earlier sold to a trust on loan account (with a specific focus on interest free loan accounts);
  • A new Transfer Duty rate of 13% is proposed for properties with a value in excess of R10 million;
  • Share issue and buy-back transactions (commonly used as part of corporate restructurings) are to be addressed as part of an anti-avoidance effort;
  • The tax treatment of subordinated loans will – with effect from 24 February 2016 – be changed through the introduction of legislation later this year. The expectation is that interest on these loans will going forward no longer be classified as dividends for tax purposes;
  • The withholding tax on services fees paid to non-residents is to be scrapped;
  • A new amnesty will apply from 1 October 2016, with a focus on prior exchange control contraventions; and
  • Effective 1 April 2017, a new tax is to be introduced on what has been described as ‘sugar-sweetened beverages’.

We are committed thereto to keeping you informed of any changes in tax legislation that will have a bearing on your specific tax position.

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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Gift from SARS

A1BThe tides are changing in the retirement savings space, with National Treasury encouraging us to save more for retirement by significantly increasing the tax incentives. This is one of several important changes that will go ahead from March this year, now that the President has approved the Taxation Laws Amendment Bill, 2015, which was passed by both Houses of Parliament at the end of last year. 

The wait is over for retirement fund members, who will enjoy increased tax deductions from their contributions to retirement funds. This includes provident funds, for which members were not previously able to claim a deduction. The tax deduction of up to 27.5% of the greater of taxable income or employment income, subject to an annual ceiling of R350 000, will come into effect.

Another change is that employer contributions to occupational pension and provident funds will be included in the gross income of employees as a fringe benefit. This means that employees will be able to treat these contributions as their own when calculating their tax deductions. These deductions are subject to the limits mentioned above. 

You will have to buy an income-providing product…

Retirement funds will also be aligned, ironing out some of the differences between the different products. One of the key changes is around ‘annuitisation’ – the process of converting retirement savings into a stream of future income. From 1 March, provident fund members, like retirement annuity and pension fund members, will only be allowed to take one-third of their retirement savings as cash and they will have to use the rest of their nest egg to buy a product that pays them an income during retirement.

Treasury has stressed that vested rights will be protected – i.e. the new rules will not apply to historic savings or to growth on those contributions. 

…unless you are about to turn 55…

If a provident fund member is 55 or older on 1 March, the new requirement will not apply. Any accumulated retirement savings as at 1 March, as well as new contributions and growth after 1 March, can still be taken as a cash lump sum at retirement. 

…or you have saved under R247 500

Members with a retirement benefit at retirement less than or equal to R247 500 will be allowed to withdraw the entire amount without the need to purchase an annuity, as of March. This is an increase on the current value of R75 000. 

Other changes

Changes around estate duty

National Treasury is also changing the way tax is handled between retirement funds and estates.

  • Included in the dutiable value of the estate for estate duty purposes: Contributions that were made on or after 1 March 2015 to a retirement fund that did not receive a tax deduction.
  • Excluded from the dutiable value of the estate for estate duty purposes to avoid any potential double counting: Contributions that did not receive a tax deduction that have been included as part of any lump sum pay outs to the member, or that have been used to offset the tax liability for annuity payments.

These amendments came into effect on 1 January 2016 and apply to the estates of members who die on or after that date. The changes will only apply to contributions made on or after 1 March 2015. 

Pay outs to expats

National Treasury is changing the definition of ‘retirement annuity fund’ to allow expatriates to withdraw a lump sum from their RAs if:

  • The expat is no longer a tax resident and leaves South Africa, or
  • The expat leaves South Africa at the end of their work visa

These amendments will also come into effect from 1 March.

Article published by Allan Gray – Newsletter issue no. 174, 14 January 2016.

Commentary by Carla Rossouw, tax specialist, Allan Gray

Allan Gray Unit Trust Management (RF) Proprietary Limited (the ‘Management Company’) is registered as a management company under the Collective Investment Schemes Control Act 45 of 2002. Allan Gray Proprietary Limited (the ‘Investment Manager’), an authorised financial services provider, is the appointed investment manager of the Management Company and is a member of the Association for Savings & Investment South Africa (ASISA).The Allan Gray Retirement Annuity Fund is administered by Allan Gray Investment Services Proprietary Limited, an authorised administrative financial services provider and approved under s13B of the Pension Funds Act as a benefits administrator.

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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Business Ethics


There is a misconception that if a business complies with all legal requirements, it also has good business ethics. However, legal compliance does not automatically equate to morally sound business practices. A member of management or an employee’s conduct may not break any laws, but it may breach the standards of business ethics.

What is business ethics?

Business ethics is a framework for acceptable moral behaviour in the workplace by both management and employees.

Benefits of good business ethics

Good business ethics create trust among colleagues as well as between employees and customers.

Companies with good business ethics are better able to attract top talent, maintain and improve their reputation and stay out of legal trouble.

Good business ethics make for happier employees and happier employees are more productive employees.

Examples of bad business ethics

Undercutting, i.e. where an organisation first drops prices to put competitors out of business and then increases prices again, is not only an example of bad business ethics but it is also illegal.

Unacceptable conduct by management and/or employees in the workplace, for example lying, stealing, sexual harassment and discrimination, erodes trust among employees and between employees and management.

Another example of bad business ethics would be using company assets or consumables for private purposes, e.g. taking office supplies home with you and justifying it to yourself with the fact that you put in some overtime earlier in the month.

Examples of good business ethics

Good business ethics practices by an employer include issues such as the overall treatment of colleagues with respect, dignity, non-discrimination, fairness, intolerance of sexual harassment, tolerance of people’s differences and diversity, and understanding and respecting conflicting points of view.

Environmental ethics apply to an organisation’s responsibility towards nature and the community and will address issues such as accountability for and prevention of pollution.

Employee ethics include, amongst others, honesty towards customers and colleagues, humility, trustworthiness, treating others with respect, commitment to the employee’s work and productivity.

The area of customer ethics may include principles such as honouring contracts, disclosure of and owning up to mistakes made by employees of the organisation and the disclosure of any flaws in a product.

Examples of financial ethics would be to uphold honest accounting practices and not inflating reimbursive travel claims.


The identification of business ethics goals and the training of employees on these goals is a requirement in creating a culture of good business ethics and trust in the organisation, as well as between the organisation and clients or suppliers. Providing ethics training teaches employees sensitivity to ethical issues and how to resolve difficult moral situations on their own within the organisation’s ethics guidelines.

Changes in technology and working environments constantly raise new ethics issues. Ethics training should be reviewed from time to time to ensure that the organisation’s ethics policy remains up to date with current circumstances and issues in the working environment.


An effective type of enforcement of business ethics is a whistle-blower system which allows an employee to anonymously inform management of unethical behaviour which comes under the employee’s attention. Employees often fear retaliation when they bring cases of unethical behaviour under attention of management; with this system employees have the option of remaining anonymous.

You will know that you are guilty of bad work ethics when you start making excuses for your behaviour and justifying your behaviour to convince yourself that your actions are not really that unacceptable.

Senior management as well as lower-ranking employees must be equally committed to moral standards in order to create a culture where good business ethics is the norm rather than the exception.

If you would like more information about business ethics, please contact your financial adviser.

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)

Reference list:

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When it comes to strategy, size doesn’t matter


To create a strategic roadmap for your business you don’t need heaps of wonderful resources; you only need to give up your preconceived ideas about strategy and open your mind. Sometimes the thing that holds a small business back the most is small thinking. If you believe that the size of your business is a disadvantage when it comes to strategic planning, simply because the big companies have all the financial resources and manpower to influence the market, then why start a business at all? Fortunately money or size of personnel is not what counts when you create a strategic plan – common sense is. Pedro Hernandez interviewed business experts who agreed that company size is not a strategic disadvantage, but rather something which enables you to change direction faster than the large companies.

Put on your strategic-thinking hat and develop the following ideas:

Keep your enthusiasm in check

You don’t need to strategise constantly; rather make sure that you understand the market conditions and that you have attainable goals – don’t waste time on too much planning. Business author Kaihan Krippendorff suggests that you use your company’s small size to out-manoeuvre larger, slower companies by addressing challenges and options and seizing opportunities over short but regular spaces of time.

Challenge assumptions

Believing in the status quo is not part of a successful entrepreneur’s strategy. The business climate is constantly changing with the help of the Internet, social media and other mobile devices. Many companies have landed on the business rubbish dump because they could not adapt to changing times. Question everything. Krippendorff suggests that you play devil’s advocate with your new ideas, then get your team together and devise plans to make the idea viable. Ignore preconceived notions about what can or cannot work – while some business principles are a given, very few business ideas are completely useless.

Avoid myopia

Joe Fuster, senior Vice-president of global sales for SAP Cloud believes that you can build a sales strategy based on the outcome you desire. Don’t miss out on good opportunities because you are too caught up in day-to-day activities to think outside the box and re-examine your progress. Change your perspective and get your team to think in more creative, profitable ways.

Jack (or Jane) be nimble, eager and bold

The market and the needs of customers keep changing, and it’s beyond your control. What you can control, however, is how you adjust to these changes and what new plans you create. Be bold in your new approach and keep an open mind as to the unconventional ways in which to grow.

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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