To help reduce South Africa’s high unemployment rate, the government is committed to growing small enterprises and encouraging entrepreneurs to undertake more business ventures.
This was reinforced by Finance Minister Nhlanhla Nene in his budget speech, where he announced lower tax rates for qualifying micro enterprises and SMEs. We look at how the tax relief impacts on small South African businesses.
Micro enterprises with an annual turnover of under R335 000 are exempt from paying tax if they are registered and qualify for turnover tax. Previously this amount was R150 000 per year. Government’s intention in increasing this amount is so that smaller businesses can use these available funds to contribute to their growth.
Turnover tax is a simplified system for micro enterprises with an annual turnover up to R1 million, and the purpose of the system is to make it easier for them to meet their tax obligations.
A second announcement from Nene was that the maximum tax rate for businesses registered under turnover tax would be reduced from 6% to 3%. What this means for businesses is:
- Turnover between R750 001 – R1 million – required to pay R6 650 plus 3%
- Turnover between R500 001 – R750 000 – required to pay R1 650 plus 2%
- Turnover between R335 001 – R500 000 – required to pay tax of 1%
To further assist SMEs, the finance minister has undertaken to establish small business desks at SARS offices to help with tax compliance, and the ministry of small business development has been allocated a budget of R3.5 billion for small enterprise mentoring and training support.
One of Finance Minister Nene’s strategic priorities for 2015 is to unlock the potential of micro enterprises. This forms part of the government’s plan to boost support for small businesses and start-ups, with the objective that more entrepreneurs initiate and launch business projects. The ultimate goal of government is to contribute to the growth of SMEs, as this is vital to a healthy economic climate.
Entrepreneurs looking for professional advice, the latest information and business support can contact LEAP on 011 449 7074 or visit www.leapco.co.za.