Everything you need to know about small business tax deductions

By Harper Banks

As a small business owner, it’s important to ensure that your organisation pays its taxes in full and on time. However, as a smaller enterprise, you are also offered certain tax perks and deductions.

We have a look at how the tax system supports small businesses, and we consider whether you should hire a tax practitioner to help you make the most of this.

Tip: Does your small business need a boost? Take out a personal loan to build its future.

Tax deductions & perks for small businesses

According to Reuben Rammbuda, mentor at Fetola, a number of tax claims or deductions are available for small businesses in South Africa. He highlights the following:

  • Companies that are registered for Value Added Tax (VAT) are eligible to claim a refund if their input VAT exceeds their output VAT.
  • Qualifying enterprises can benefit from small business corporation tax with a minimum rate of between 0% to 7% for taxable income of less than R365,000 – which is far less than the corporate tax rate of 28%.
  • The employment tax incentive encourages employers to hire young and less experienced work seekers, thus reducing the cost of employment.
  • Small enterprises can minimize their tax burden by investing in depreciating assets and other capital assets.
  • They can claim their official travel costs, provided their remunerations are properly packaged to reflect the applicable travel allowances.

READ MORE: Don’t forget these deductions when submitting your tax returns

Should you hire a tax practitioner?

Rammbuda says that the South Africa Revenue Service (SARS) is changing its system at an unbelievably fast pace.

“I believe that the incessant changes and updates on applicable tax laws require a dedicated resource – otherwise known as a tax practitioner,” says Rammbuda.

“They are held to high standards of professionalism and ethics by their respective controlling bodies, and SARS requires compliance with Continuous Professional Development (CPD) hours,” he explains.

This means that tax practitioners are required to do regular comprehension tests, for which they earn CPD points. During the course of a year, they need to earn a certain number of points in order to continue practicing in South Africa.

Rammbuda says that tax practitioners are often covered by professional indemnity insurance to protect their clients in case of any errors. Overall, he recommends that all small business owners invest in a tax practitioner.

“The cost of errors that a business owner can make on their taxes is incomparable to the cost of getting the services a tax practitioner,” says Rammbuda.

Have a look at our income tax calculator if you’re curious about your personal taxes.

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