You should get a financial advisor

Finance News , ,

It’s not to say you spend finances irresponsibly, but having a reputable financial advisor comes in handy. Depending on your financial needs, your advisor may be a financial or retirement planner, money manager or a wealth manager. Either way, getting assistance from those who specialise will help you get greater returns for the bucks you spend on their services.

They’ll help you strategise

Whether your financial objective is to donate to charity, leave a financial legacy for your offsprings, or minimise your tax burden and debt, financial advisors strategise and keep you informed on methods that will benefit you.

They’ll assess risks

Putting all your eggs in one basket? Risky. Each portfolio has expectations and having clarity on emotional and behavioural risks of these investments will help you plan ahead for tough times. Advisors will assess where investment risks lie and help you diversify your investments accordingly.

They can do more

If you get yourself an advisor who specialises in more than just financial opportunities, they will provide a scope of the whole financial market by taking a big-picture approach. Because your needs differ from the next person, your financial advisor will structure your financial priorities to suit you. They also search for opportunities across other areas that concern you, such as your estate, and plan your finances in a way that will give a greater positive impact on your portfolio.

If you’re interested in generating financial security and not sure how to go about it, start with contacting a financial firm. In the long run, the money you spend for advisory assistance will be far less than the money you could lose in a faulty investment due to having little information.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

Belastingbeplanning: Minder ja, maar nie niks nie

Accounting , ,

Belastingbeplanning is noodsaaklik om te verseker dat jou welverdiende Rande, binne alle wette en regulasies van die Suid-Afrikaanse Inkomstediens en die Inkomstebelastingwet, te rek vir die nabye toekoms maar ook vir jou goue jare.

Dit is ‘n gegewe dat almal iewers belasting sal betaal, ongeag hoe haarfyn jou beplanning is.

 

Daar is ‘n diverse verskeidenheid produkte, strategieë en instrumente waarvolgens doeltreffende belastingbeplanning oor jou leeftyd gedoen kan word om te verseker dat jou bates groei terwyl voorsiening ook gemaak word vir boedelbelasting sou jy tot sterwe kom.

‘n Trust is ‘n nuttige instrument om te gebruik in jou soeke na doeltreffende belastingbeplanning. Die aankoop van bates, met langtermyn groei potensiaal, binne ‘n trust verseker dat die bate groei binne in die trust en nie in jou boedel nie. Daar moet wel deeglik aandag geskenk word aan artikel 7C van die Inkomstebelastingwet wat van toepassing is op gelde wat rentevry aan trusts gemaak word deur trustbegunstigdes om bates aan te koop.

‘n Trust bied aan die oprigter ‘n nuttige instrument om bates te beskerm en te behou tot die voordeel van die erfgename van die oprigter, die oprigting kan die bates deur trustees, beide verwante en onafhanklike persone, sodanig laat bestuur dat daar deur generasies voldoende voorsiening gemaak kan word vir die nasate van die oprigter. Die beperkte insae van begunstigdes in die besluitnemingsproses kan verhoed dat partye met lang vingers die trust se bates vir hul eie gewin in te palm.

Hierdie artikel is ʼn algemene inligtingsblad en moet nie as professionele advies beskou word nie. Geen verantwoordelikheid word aanvaar vir enige foute, verlies of skade wat ondervind word as gevolg  van die gebruik van enige inligting vervat in hierdie artikel nie. Kontak altyd ʼn finansiële raadgewer vir spesifieke en gedetailleerde advies. (E&OE)

Managerial accounting: The key to making better decisions

Accounting , ,

As a manager of an organisation, there is a great responsibility for decision making. The question lies in how a manager can utilise accounting information to make better decisions. Managerial accounting is a common practice within an organisation where accounting information is identified, measured, analysed, interpreted and communicated to relevant parties to pursue a goal.

Accounting information can be analysed in different ways and be used for different purposes. It’s important to identify the type of decision that needs to be made to ensure that the correct accounting information is gathered and analysed for the best decision making.

For instance, an organisation that wants to attract investors will depend mostly on cash flow statements and cash flow forecasts, the income statement and a balance sheet, whereas an organisation that needs to apply for a loan will rather look into certain ratios such as debt to equity and debt to service coverage ratios.

Managerial accounting is mostly used in scenarios where quick decisions need to be made to help managers optimise business operations. Accounting information is used by managers to plan, evaluate the company performance and manage risks. Budgeting is a great part of an organisation and financial reporting can help a manager to set a realistic budget and identify the need for funding. To measure the company’s performance certain ratios can be used such as the liquidity ratio which measures the company’s ability to generate cash to meet the short-term financial commitments, efficiency ratio that mostly relates to the inventory turnover and the profitability ratio can be used to measure the return on assets and net profit margins.

The first step to making an informed decision is to have information that is reliable and up to date, thereafter the accounting information can be utilised in different ways to ultimately form a report that would help management to make better decisions.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

Distributions to beneficiaries of an employee trust

Employee , ,

Binding Private Ruling 330 (“BPR330”) was issued on 3 October 2019 and relates to the tax implications arising from distributions of dividends and other amounts from an employee trust to beneficiaries on the termination of their employment.

The taxpayer (a resident trust) was established for the benefit of the black permanent employees of Company A. The object of the trust was to invest funds from time to time and to use the return on these investments for the economic, health, educational and emergency benefits of its beneficiaries.

The trust funds to be administered in this regard will include donations made to the trust, any assets the trustees may acquire (not limited to shares), any net revenue capitalised by the trustees in their discretion and any other interest, dividends or accruals in favour of the trust.

The trustees of the trust are entitled to, in their discretion, select one or more of all the employees to allocate or distribute all or part of the trust’s net revenue. These employees will only have a claim against the trust from the date of vesting of the benefit and are not entitled to deal in any way with the respective trust funds or interest in the trust before such date.

It is envisaged that the trustees will, from time to time, vest dividends in the employees that the trust receives from Company A. These dividends will be distributed immediately after it is received by the trust.

The trust deed furthermore provides for the allocation of beneficial units. Employees that hold these units may only dispose of them to the trust. Also, the trust must repurchase the units when the employee ceases to be an employee at a repurchase price determined by the trustees in their discretion.

The proposed transaction that was considered in terms of the BPR was the repurchase of a beneficial unit from a beneficial unitholder on the date the unitholder ceased to be an employee. The repurchase was funded by existing funds and not a specific dividend that was received.

In terms of the BPR, the unitholder received an amount as a beneficiary of the trust by reason of the termination of its employment and confirmed that this amount would be included in the employee’s gross income, in terms of paragraph (d) of the definition of “gross income”, and be subject to employees’ tax as provided for by the Fourth Schedule to the Income Tax Act.[1]

Also, all amounts to be distributed to the beneficiaries will constitute remuneration as defined in the Fourth Schedule and will be subject to employees’ tax.[2]

[1] No. 58 of 1962

[2] See section 10(1)(k)(i) and the definition of “remuneration” in paragraph 1 of the Fourth Schedule.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

Valuation of trading stock for tax purposes

Tax , ,

On 27 September 2019, just over a year since delivering judgement in another matter with very similar facts, the Supreme Court of Appeal in CSARS v Atlas Copco South Africa (Pty) Ltd (834/2018) [2019] ZASCA 124 gave a judgement on the valuation of trading stock for income tax purposes.

The general (and oversimplified) principle is that taxpayers are allowed, as a deduction, the value of opening trading stock during a year of assessment, while the value of the closing trading stock is required to be included in taxable income. From a tax perspective, the higher the value attributed to closing stock at the end of a tax year, the lower the cost of sales for that year will be and the greater the taxable income of the taxpayer. Conversely, the lower the value attributed to closing stock, the higher the cost of sales and the lower the taxable income for that year. The value of the trading stock is generally the cost thereof, less an amount which SARS may think is just and reasonable as representing a diminishing in that value due to damage, deterioration, change of fashion, decrease in the market value or for any other reason.

Taxpayers often use accounting (or IFRS) values for the determination of stock values. These valuation methods usually involve a time-based approach. I.e. a write-down of stock if it has not been sold for several months. The more the number of months since the stock was last sold, the higher the write down. This approach is often based on internal policies. The court notes (in the previous judgement) that:

“If taxpayers had a free hand in determining the value of trading stock at year-end it would open the way for them to obtain a timing advantage in regard to the payment of tax, by adjusting the value of closing stock downwards. They could by adjusting these values manipulate their overall liability for tax in the light of their anticipations in regard to future rates of tax, future trading results, the need to incur significant expenses in the future and the like.”

The Court finds that IFRS values, based on “net realisable value” are explicitly forward-looking and that using this value for tax purposes, has the effect that expenses incurred in a future tax year in the production of income accruing to or received by the taxpayer in that future tax year, become deductible in a prior year. Whether IFRS values was a sensible and business-like manner of valuing trading stock from an accounting perspective was neither here nor there for tax purposes. The concern was whether it accurately reflected the diminution in value of trading stock. For income tax purposes, the exercise is thus one of looking back at what happened during the tax year in question.

SARS may only grant a just and reasonable allowance in respect of a diminution in value of trading stock in two circumstances. The first is where some event has occurred in the tax year in question causing the value of the trading stock to diminish. The second is where it is known with reasonable certainty that an event will occur in the following tax year that will cause the value of the trading stock to diminish.

It may, therefore, be necessary that taxpayers keep to sets of trading stock valuations: one for accounting purposes and one for tax purposes.

Although often only a timing issue between opening stock (for which a deduction is allowed) and closing stock (which is taxable), it could happen that the assessment in respect of the year during which the deduction applies, may have prescribed by the time the dispute relating to the closing stock matter has been finalised. In such an instance, any difference becomes permanent, and not merely a timing difference. It is therefore advisable that any disputes relating to trading stock be dealt with by taxpayers as a matter of urgency.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)
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