For a small business, saving on tax can be the difference between using their resources wisely and getting the rug pulled out from under their feet. Whether you are thinking about growing your business or surviving through a difficult period, the one thing that can really push you over the edge is tax and the burden that comes with it.
If you are looking for ways to protect your business from paying out more tax, here’s what you can do:
While you can feel happy running your small business as a sole trader, there may come a time when it makes more sense to incorporate your company. For example: companies that earn over R20 million or have less than 20% of revenue from investments would actually benefit from moving out of the sole-trader structure and moving into a small business corporation.
Remember all those days you were at the coffee shop, picking up your morning cuppa, or those endless hours talking on a pay-as-you-go mobile phone – well, keep those receipts because when it’s time, even single one of them can help you save on your taxes.
If you are looking for a way to own a car but include it as a company property, you might think it’s smart … but think again. If you do decide to buy your car but list out all your travels (or at least most of it) as a travel expense, you might actually end up saving a lot more tax than if you were to buy the car as company property.
A huge misconception in the car-buying mentality is that if the expense can be written off, why not just buy any car? Well, the fact is, if your business is paying your travel allowance and your total claims are based on your work-related travel, then you cannot pay more than R119,000 or so for your vehicle’s lease.
If you are thinking about how to reward yourself, a salary within 25% to 40% tax bracket would make the dividend look extremely nice. However, if you are taking home much more than that, a dividend would actually save you more tax.
These are just some of the things that you can do to save a bit more tax on your financial accounts. Get in touch with a professional financial consultant today and you could gain much more out of your financial management process.