TAX FREE SAVINGS AND INVESTMENT ACCOUNTS
National Treasury issued a media statement on Friday 20 February 2015 to indicate that the Minister has approved the publication of the Regulations and Notice under section 12T(8) of the Income Tax Act, 1962 that allows for the introduction of Tax Free Savings and Investment Accounts with effect from 1 March 2015.
Therefore, from March 1 this year, individual investors can invest up to R30 000 a year in tax-free savings accounts. While the capital investment will be capped at R500 000 over his or her lifetime, all proceeds earned (interest, dividends and capital growth) will be 100% tax-free. As stated in the media statement, “the regulations aim to ensure that appropriate financial products are developed and market conduct practices are in line with the objectives of financial sector regulatory reform”.
A financial instrument or policy in respect of a tax free investment may only be issued by-
- A bank as defined in section 1 of the Banks Act
- A long term insurer as defined in section 1 of the Long-term Insurance Act
- A manager as defined in section 1 of the Collective Investment Schemes Control Act (other than a manager of a collective investment scheme in participation bonds)
- A manager as defined in section 1 of the Collective Investment Schemes Control Act of a collective investment scheme in participation bonds that complies certain requirements
- The government of the RSA in the national sphere
- A mutual bank as defined in section 1 of the Mutual Banks Act
- A co-operative bank as defined in section 1 of the Co-Operative Banks Act
Most savings accounts with banks, fixed deposits, unit trusts (collective investment schemes), retail savings bonds, certain endowment policies issued by long-term insurers will be eligible as tax free savings accounts Amongst other things, this means that all earnings on tax-free investments will be exempt from tax, including dividends. All contributions must be in cash – unit transfers will not be allowed during the first year of the incentive, until 1 March 2016.
Tax free investments will however be added to the estate of the taxpayer, and therefore subject to estate duty, however the returns thereon will continue to be exempt from income and dividends tax. The reporting requirements of service providers will be set out in the Business Requirement Specifications to be published by SARS. This article provides a brief overview of the new Regulations. You are strongly advised to contact our offices for further information and assistance on the topic.
TRUSTS – SARS NEW REQUIREMENTS
During 2014 SARS redesigned, and set in place stricter requirements regarding Tax Returns for Trusts. One of their main goals for doing so, was to obtain more accurate returns, and greater compliance.
There are many advantages to setting up a trust, some of which include:
- Good risk and estate planning device
- Assets don’t from part of the insolvent estate in the event of sequestration
- Strict controls – trustees are accountable to the Master of the High Court
- Perpetuity – the trust ordinarily continues to exist as an entity, despite the death of the founder, a trustee or beneficiary
- Special trusts can be formed for the mentally ill or seriously disabled, and will beallowed a CGT exemption if a fixed property is held in the trust, and if it is a primary
residence (and meets other requirements to qualify)
In light of SARS’s new requirements regarding trust tax returns, and to ensure general legal compliance, it is advisable for trustees to review their trust deed from time to time. Particularly to ensure that the criteria set by the Trust Property Control Act, case law and SARS regulations are met.
The review would encompass questions such as:
- are my beneficiaries correctly listed and updated?
- is there a recent Letter of Authority reflecting who are the authorised trustees registered at the Master’s office?
- are the minimum number of trustees appointed, as set out in the deed ?
- have minutes of trustee meetings and resolutions been recorded and updated in a “trust minute book”?
- does my trust set of accounts correctly reflect distributions made to beneficiaries in accordance with the deed and for taxation purposes?
Should you wish to review your trust deed, or require any other assistance in this regard, please contact our offices.
SARS – IMPORTANT DEADLINES
Please take note of these important SARS deadlines:
- 1 April 2015 – Employer Annual Reconciliation starts
- 7 April 2015 – Submission and payment of EMP201
- 24 April 2015 – Submission and payment of VAT201 – manual registered vendors
Note that taxpayers need to file their returns within the SARS deadlines if they wish to avoid fines and penalties.
Feel free to contact our offices if you have any questions or if you need any help.
MODERNISING CAPITAL FLOW MANAGEMENT
A management reporting system is a structured method in which to capture data essential to the management of a business. The reports produced comprise crucial data needed to monitor the business on a regular basis. The reports should be concise, yet telling, and every element that is reported on should contain information that is relevant to achieving the goals of the business.
The purpose of management reports is to monitor both the overall success of the business, and performance against plan. It is useless to set up Key Performance Indicators (KPI’s) if they are not being monitored and managed. By creating management reports it is possible to see downward trends early and to take action to prevent them from further declining. Alternatively, it is possible to see upward trends and determine what is going well and possibly apply that concept across the organisation – in particular to the areas that are not doing so well.
In designing a management reporting system, base it on KPIs derived from the business’ strategic plan.
Key steps in developing a management reporting system
- Gain an understanding of your strategic business plan.
- Review the current management information system
- Design the management reports
- Design the reporting system
The system should include, at a minimum:
- A list of the management reports along with the recipients
- Frequency of reporting and a timetable for production of all reports, i.e. end dates for input, processing, output and reconciliation, presentation
- Responsibilities for providing input data, outputs, delivery of reports, and identity of key managers responsible for performance in each area being measured
- Sources of all input data should be identified
Should you wish to implement a management reporting system or review your existing system please do not hesitate to contact us for professional advice in this regard.