Financial and Tax Wisdoms

Government has once again recognised the vital role that small businesses play in stimulating the economy, job creation, poverty alleviation and general development. Accordingly considerable efforts have been made to improve the economic environment for small businesses.

Government has once again recognised the vital role that small businesses play in stimulating the economy, job creation, poverty alleviation and general development. Accordingly considerable efforts have been made to improve the economic environment for small businesses. Besides the relief provided in removing RSC levies the following changes were announced, which will cost the government R400 million:

The annual turnover limit to qualify as a small business corporation will increase from R6 million to R14 million for tax years ending on or after 1 April 2006.

• The income tax rates applicable to these companies will be as follows for tax years ending on or after 1 April 2006:
  Taxable income - Rate
  R0 to R40 000 - 0%
  R40 001 to R300 000 - 10%
  R300 001+ - 29%
• The once-off capital gains tax relief for individuals for the disposal of small business assets under certain circumstances will be increased from R500 000 to R750 000 with effect from tax years commencing on or after 1 March 2006.
• The threshold for the 100% depreciation on individual small assets will increase from R2 000 to R5 000 for assets purchased on or after 1 March 2006.  (It is not specifically stated but this should apply to all businesses, not just small business corporations.)
• The VAT thresholds for category D (small farmers) and category F (four -monthly filers) will be increased from R1 million to R1.2 million for tax periods commencing on or after 1 July 2006.

In addition the definitions of a “small business corporation” and a “deemed employee”, which affect some small businesses, will be amended.

The tax dispensation relating to cooperatives will be adjusted in light of the promulgation of the Cooperatives Act (2005).  In addition, amendments are proposed to enable cooperatives that operate like small business corporations to enjoy the same preferential tax treatment.

For further information, contact:
Corporate Communications Consultants (Pty) Ltd
Contact:  Sue Brewitt
Tel:  (011) 783-8926 or 082-491-0365

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