Finance minister Nhlanhla Nene’s latest budget promised decent relief for small business. But on closer inspection, it looks like many small businesses will be no better off.
As Finweek reports, the news is not particularly heartening for those who run their own consultancies.
Although budget 2015 has delivered some good news for small business, the South African Institute for Professional Accountants (SAIPA) says it’s not all good news, particularly for those who run their own consultancies. And, according to SAIPA tax expert Ettiene Retief, there’s some bad news hiding in the annexures for companies that do business abroad.
Small business tax break doesn’t benefit all small businesses
Finance minister Nhlanhla Nene’s announcement that small businesses with a turnover of less than R1m a year will benefit from a more generous tax regime is a little misleading, according to Retief. Nene said that those with a qualifying turnover of less than R335 000 a year will pay no tax and the maximum rate will be reduced from 6% to 3%.
However, according to Retief, this does not apply to small businesses that provide services as their core business, for example, accountants, engineers, graphic designers etc. “For several years now, we have seen no tax breaks for small business owners who provide personal services, despite calls for incentives to be extended to them,” says Retief.
Here’s what the new tax rates look like for micro businesses.
Turnover 2015/6 Rates of tax
R0-R335,000 0% of taxable turnover
R335,001-R750,000 1% of the amount above R335,000
R500,001-R750,000 R1,650 + 2% of the amount above R500,000
R750,001-R1m R8,850 + 3% of the amount above R750,000
Unemployment Insurance Fund fees will be reduced to just R10 for a year. UIF deductions will be based on 1% of the first R1000 of an employee’s salary, so contributions for workers and employers will only be R10.