Two tax proposals relevant to micro and small business caught my attention during Pravin Ghordan’s budget speech.

  1. a.       Turnover tax for micro businesses

Several reforms of the turnover tax for micro businesses (with annual turnover below R1 million) were announced in 2011. Building on these reforms, small business will now be given the option of making payment of turnover tax, VAT and employees’ tax at twice-yearly intervals from 1 March 2012.

It is further envisaged that a single combined return will be filed on a twice-yearly basis from 1 March 2013. The number of returns and payments therefore required for these taxes will fall from about 18 per year to only two a year in 2013.

A word of warning though – the build-up of tax liability will require such taxpayers to ensure that funds are available when payment is due.

  1. b.      Small business corporations

To encourage the growth of small business corporations (with annual turnover under R14 million), government proposes to increase the tax-free threshold for such businesses as follows.

Taxable Income              Rate of tax
R0 – R63,556 0%
R63,557 – R350,000 7% of amount above R63,556 but less than R350,000
R350,001 and above R20,051 + 28% of amount above R350,000

This table will be effective for years of assessment ending on or after 1 April 2012.

-By Rob Wilkie, CFO Softline and Sage AAMEA