HomeHome SearchSearch MenuMenu Our productsOur products

Two businesses? And only one is making a profit? Use this escape hatch to pay less tax

by , 20 April 2016
Dear reader,

You may think your only option is to close down the company that isn't making a profit. But don't be too hasty with your decision.

There's an escape hatch you can use to save your company and pay less tax.

*************Slash Your Tax Bill*************
Meet the ultimate tax-bill slasher...
31 different tax breaks you can implement today to save your business thousands of rands! It covers everything from building allowances, to wear and tear. You'll never need to hunt out the tax loopholes again - just keep this handy book on your shelf. And enjoy the savings!
Find out what they are here...
What is the escape hatch?
It's a sneaky way of getting out of paying tax on an unprofitable company. But only if you're a sole proprietor or a salaried individual and have some extra businesses (not cc's or PTY's) on the side. You can offset the profits from one business to the other to cover its losses (Section s20 of the Income Tax Act).
Say for example, you're an accountant but you also operate a security business on a part-time basis. The security business isn't doing well so you use the profits you make from accounting to offset the losses your security business makes. This will lower the tax you have to pay. This is because, on your tax return, you'll have all the income reflecting as one amount. So if one company is running at a loss and the other one is making profits, your net income will be lower, putting you in a lower tax bracket, saving you money.
How to qualify for the escape hatch
To qualify you must show the following:
  • Your trade is a business, not a hobby (something SARS classifies as a suspect trade) nor a tax-avoidance scheme;
  • There's a good chance your trade will make a profit; and
  • You'll be able to make profits in 6 out of 10 years.
 Find out if your trade is truly a trade, in The Practical Tax Loose Leaf here. Read on to see if you still qualify for the escape hatch.
*************This is your tax savings year! *************
Take advantage of your 2016 tax savings
There are new tax challenges every day: When you calculate and pay tax to SARS, you constantly have to comply with the complicated tax laws. If you don't, your company will face additional costly interest and penalty charges that will arise from an unwanted tax audit.
How can you be sure you don't miss an interpretation of the tax law and make sure your company doesn't face a SARS audit?
The solution is the Tax Watch Newsletter
This is because current tax issues are discussed in a practical and user-friendly way and you can implement the advice immediately. Get you copy now
Your trade must make a profit
You must be able to prove your trade will make a profit. If you can't you won't qualify for the escape hatch.
You must make profits in 6 out of 10 years
The escape hatch won't apply if you incur six years of losses during the previous 10 years of assessment. This includes the year at issue before you take into account any balance of assessed loss you carry forward. This limitation is the '6 out of 10-year rule'.
For a detailed practical example of how to do this, get your copy of The Practical Tax Loose Leaf now.
P.S. This is just one of the ways you can save on tax. For another 99 tax breaks, go here.

Related Products


Recommended for You 

  Quick Tax Solutions for Busy Taxpayers – 35 tax answers at a glance

Here are all the most interesting, thought-provoking and common tax questions
asked by our subscribers over the last tax year – everything from A to Z!

To download Quick Tax Solutions for Busy Taxpayers – 35 tax answers at a glance click here now >>>
  Employees always sick? How to stop it today

Make sure you develop a leave policy to regulate sick leave in your company.

BONUS! You'll find an example of the leave policy and procedure in this report.

To download Employees always sick? How to stop it today click here now >>>
  Absenteeism: Little known ways to reduce absenteeism

This FREE e-report will tell you how you can reduce absenteeism in your workplace while avoiding the CCMA and without infringing your employees' labour rights.

To download Absenteeism: Little known ways to reduce absenteeism click here now >>>
  7 Health & safety strategies to save you thousands

Don't let a health and safety incident cost you one more cent. Implement these seven
strategies in your company today.

To download 7 Health & safety strategies to save you thousands click here now >>>