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Made a financial loss this year? Here's how to carry it forward into the next tax year correctly

by , 28 August 2014
Most business owners turn white when they realise that their business made a financial loss, but you shouldn't.

You see, thanks to SARS and the tax deductions it allows you to claim, you can compensate for those losses.

But if you made a loss at the end of the current tax year you can carry it forward so you can claim those deductions off next year's tax bill.

It's true! Here's how...


Here's an example of when you can carry your financial loss forward into the next tax year

Once you've identified that you have a tax loss and SARS will allow it, you can carry it forward.
Let's look at an exampleto understand how to do this correctly.
Let's say you own a flower delivery business. In the 2013 year, you spent R500 000 on advertising to attract new customers. But you only made income of R350 000. This is a tax loss of R150 000.
If you were trading in both 2013 and 2014, your loss will qualify as an assessed tax loss. So how do you carry it forward into 2014?
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Legally pay less tax

Here's how to carry your financial loss over to the next year

1. Record the tax loss on your company tax return in 2013. Write the full amount of the loss (i.e. R150 000).
2. When you calculate your 2014 taxable income, deduct the loss from your total. If you made R380 000 in 2014, your total taxable income after you deducted the loss is R230 000.
3. Write the amount of the deducted loss on your company tax return. And you must record your total taxable income, as you normally would.
SARS automatically records your assessed loss in the assessment. When it issues the assessment, check that SARS' record of your assessed loss is correct. If it isn't, you can object and request SARS to correct the assessed loss for next year. 
There you have it. Don't panic if your company makes a loss, just carry it forward and deduct it off your taxes.

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