HomeHome SearchSearch MenuMenu Our productsOur products

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

by , 09 February 2017
Two businesses? And only one is making a profit? Use this escape hatch to pay less taxYou 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.

Let's see if you qualify for it and how you can use it to pay less tax and save this company from closing down.

************* Advertisement *************

Meet the ultimate tax-bill slasher...

Over 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 CCs or PTYs) 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 have 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 lowers 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. This will put you in a lower tax bracket, and will then save you money.

Now that you know what the escape hatch is, let's see if you qualify for it…

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 (The Practical Tax Handbook will show you how to see if your trade is really a business in more detail. Claim your risk-free copy here to find out more);
  • 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.
Read on to see if you still qualify for the escape hatch.
************* Editor's choice *************
Take advantage of your 2017 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 Practical Tax Handbook...

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 Handbook now.

Vote article

Two businesses? And only one is making a profit? Use this escape hatch to pay less tax
Note: 5 of 1 vote

Related articles

Related articles

Related Products