Tags: turnover tax, sars, small business owner, tax, tax returns, income tax

Does your company earn less than R1 million in turnover a year? If so, you could reduce your tax bill by 90% and stop wasting hundreds of hours filling out tricky forms. Simply apply to SARS to pay turnover tax instead. Here's how to know if your business qualifies...

'Turnover tax is a great alternative tax system for small and micro-businesses', states The Practical Tax Loose Leaf Service.
 
After all, before the introduction of turnover tax all businesses – even tiny start-ups –had to register for income tax. This means many small business owners would spend countless hours trying to submit their tax returns and other tax requirements on time, instead of doing the one thing that'll actually make their business a success: Looking for new business and servicing existing clients' needs.
 
But thankfully for small business owners, SARS' has removed this burden and replaced all of these taxes with one simple tax: Turnover tax.
 
Does your business qualify for turnover tax?
 
Your company could be paying turnover tax instead of income tax, if*:
 

• Your company's turnover won't exceed R1 million in the year of assessment.
• Your financial year end falls on the last day of February.
• Your company wasn't registered for turnover tax in the last three years.
• The total income from disposed asset for the last three years wasn't more than R1.5 million.
• Your company has a SARS exemption certificate. (This is only applicable if your company is a labour broker.)
• All the partners of the business will remain natural persons throughout the coming assessment year. (Only applicable if your company is a partnership.)
• The owner – or any of the partners – don't hold shares/interests in a CC, company or co-operative (this excludes interests in listed shares on the JSE, collective investment schemes like unit trusts, venture capital companies, etc.).

 
* Note that these factors are only applicable for individuals and partnerships, if your company is a registered CC or cooperative, another set of factors will apply.
 
However, no matter how small your business might be, says Muneer Hassan of MoneyWeb Tax, your company won't qualify for turnover tax if it:
 

• Has a year-end that falls in any other month than February;
• Is a public-benefit organisations (PBO);
• Is a club; or
• Is a professional services business such as an accounting, bookkeeping, secretarial services or translation business.

 
The benefits of turnover tax are incredible…
 
Thanks to SARS' turnover tax system, small business owners only need to:
 

• Submit three tax returns a year – not the ten tax returns or more businesses that use the normal Income Tax system have to submit.
• Your business pays a lower tax rate
• And don't forget the greatest benefit of all. By decreasing the administration tax burden for small business owners, it'll also free businesses up to concentrate on generating profit.

 
With this in mind, it would be crazy for small business owners whose companies qualify not to consider moving to SARS' turnover tax system. To do so, simply get the Turnover Tax 101 e-report here!
 
For more about turnover tax, also read:

• How to save R10 000 before the end of the year
• Do you want to save on your taxes by 90% and submit 2/3 less paperwork to SARS?
• How to move onto the turnover tax system
• You only have 16 days to get your turnover tax payment in

Author: Karin Iten