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Don't add to your tax crimes by selling or hiding assets if you're declared insolvent!

by , 05 February 2013
Julius Malema's assets are being kept in storage because he doesn't have enough money to pay off his R16 million SARS' tax bill. Now there's speculation that he's been donating or hiding assets. This is the worst thing you can do if your tax affairs are under SARS' spotlight - it amounts to tax fraud. But don't panic that SARS will leave you with nothing if declared insolvent, here are four asset types they can't seize.

Last week, the South African Revenue Services (SARS) announced that Malema owed it R16 million.
And as Malema is unable to pay these taxes, SARS has warned that it would seize all his properties if he fails to pay, says Crystal van Vyk on The Africa Report website.
 Has Malema been hiding assets to put SARS off the trail?

But the value of his assets is far below the R16 million tax bill, write Dianne Hawker, Candice Bailey and Moloko Moloto on IOL.
This is why SARS is seeking a sequestration order, which mean SARS suspects Malema has hidden assets that he's been disposing of.
If Malema did make donations and is later found to be insolvent, his creditors could be asked to repay the money.
If you find yourself in a similar boat, the worst thing to do is clear your bank accounts and start to your sell stock or hide your assets to prevent your creditors from getting a share of proceeds of the sale.
You'd be charged with tax fraud for intentionally cheating the tax system, says the Tax Bulletin.
Luckily, there are some assets that can't be seized if you're declared insolvent
Four asset types that won't be seized if you're declared insolvent:

1. Your personal clothing and bedding;
2. Any pension, or interest in an approved pension or other retirement fund;
3. Any remuneration for work you've done after the sequestration date; and
4. Certain 'protected' policies, such as life policies taken out on your own life if they've been active for at least three years.
If you're under investigation because SARS suspects something fishy in your accounting, keep everything above-board or, like Maleman, you'll face further penalties and only make things harder for yourself in the long run.

Remember, becoming insolvent doesn╩╝t just affect you. It affects all those around you, especially those people you owe money to. If you want more information on insolvency get your hands on The Practical Accountancy Loose Leaf. In it we've got a dedicated chapter on insolvency and you'll discover:
  • What does 'going insolvent' mean?
  • What happens when you go insolvent?
  • Step-by-step: What'll happen during the administrative process?
  • What happens when there're not enough assets to cover liquidation costs?
  • 4 things you must remember about insolvency
Get your Practical Accountancy Loose Leaf   here...


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