Are You Ready for the Next Provisional Tax Deadline

Are You Ready for the Next Provisional Tax Deadline?

by BusinessTax

Tax deadlines always seem to sneak up at the worst time, but proper planning can prevent a last-minute scramble. With the next provisional tax deadline fast approaching, now is the time to ensure you’re fully prepared.

Understanding Provisional Tax

Provisional tax is a system that allows businesses and individuals classified as provisional taxpayers to pay their income tax in advance through two or three payments over the tax year. This approach helps to prevent large, unexpected tax liabilities when submitting annual income tax returns (ITR12 for individuals, ITR14 for companies) at the end of the tax year.

While this system offers the benefit of spreading out tax payments, it also brings added administrative responsibilities, including timely submission of provisional tax returns (IRP6). Failing to comply can lead to hefty penalties, especially for under-estimation.

Who Needs to Pay Provisional Tax?

  • All companies are automatically provisional taxpayers.

  • Individuals who earn income outside of a traditional salary (such as from a business, freelance work, investments, or rental properties) may also be liable.

  • SARS places the responsibility on taxpayers to determine their provisional tax status, so it’s best to verify your obligations with a professional.

The Three Provisional Tax Payments

  • First Payment: Due within the first six months of the tax year. If your 2025 tax year started on 1 March 2024, your first payment was due by 31 August 2024.

  • Second Payment: Due by the last working day of the tax year (28 February 2025 for those on a March-February cycle). This payment has stricter regulations and penalties for under-estimation.

  • Third (Optional) Payment: Can be made after the tax year ends but before SARS issues the final assessment. This is useful for reducing interest on any outstanding tax amounts.

Why the Second Payment Matters

The second provisional tax payment is critical because it is a final estimate of total taxable income for the full tax year. SARS imposes under-estimation penalties if your reported income is significantly lower than your actual taxable income.

  • If taxable income is under R1 million, your estimate must be at least 90% of actual income or match the basic amount from the prior year to avoid penalties.

  • If taxable income is over R1 million, your estimate must be at least 80% of actual income.

Failure to meet these thresholds results in a 20% penalty on the difference between the tax already paid and the revised tax calculation. SARS may also request documentation to justify your estimate and can increase your assessment at their discretion.

Avoid These Common Pitfalls

  1. Failing to Submit a Nil Return: Even if you owe no tax, you must still file a nil return. Late or missing submissions attract administrative penalties.

  2. Late Payments: Missing the deadline results in an immediate 10% late payment penalty, plus interest on the outstanding balance.

  3. Incorrect Estimates: Under-estimating taxable income can lead to penalties and interest, making accurate record-keeping essential.

How We Can Help

Navigating provisional tax requirements can be complex, but you don’t have to do it alone. At Maverick Accountants, we ensure your tax estimates are accurate, compliant, and submitted on time. Our expertise can help you avoid penalties, reduce tax liability, and streamline the process so you can focus on what matters most – growing your business.

Don’t wait until the deadline is upon you. Get in touch with us today to make sure your provisional tax is handled correctly and stress-free!

Tax Compliance in 2025: Staying Ahead of the Game

Tax Compliance in 2025: Staying Ahead of the Game

by BusinessTax

Why Tax Compliance Matters More Than Ever

“Being tax compliant and ‘paying your fair share’ is not just good for you, but also contributes to the positive growth of our country’s economy which in turn benefits all South Africans.” – SARS

With a revenue target of R1.84 trillion for the 2024/25 tax year, SARS is ramping up its compliance efforts. Businesses and individuals can expect enhanced data tracking, stricter enforcement, and more sophisticated technology to ensure everyone pays their dues.

Falling behind on tax compliance isn’t just a financial risk – it can also result in penalties, legal action, and reputation damage. On the flip side, maintaining a clean tax record unlocks new business opportunities, strengthens investor confidence, and ensures smoother operations.

Here’s what you need to know to stay compliant in 2025.

How SARS is Strengthening Compliance Measures

SARS is investing heavily in data science, AI, and third-party data sources to expand the tax base and catch non-compliance. Key initiatives include:

✅ AI-Powered Monitoring – Machine learning models will detect discrepancies and flag suspicious activity.

✅ Expanded Third-Party Data Use – Banks, medical schemes, and financial institutions will be leveraged for cross-referencing taxpayer information.

✅ Tighter Customs & Excise Controls – Expect stricter enforcement against illicit trade and tax evasion.

✅ Stronger Debt Collection & Dispute Resolution – SARS is prioritising faster resolution processes and stricter debt recovery mechanisms.

✅ Severe Penalties for Defaulters – Non-compliance will result in significant administrative and legal costs.

If you think your tax status is flying under the radar, think again – SARS is watching more closely than ever.

What Tax Compliance Looks Like in 2025

For businesses to remain compliant, they must:

✔️ Be registered for all applicable tax types.

✔️ Ensure all tax reference numbers are merged and declared on eFiling.

✔️ Submit all required returns on time.

✔️ Keep company details updated with SARS.

✔️ Pay tax liabilities on or before deadlines, or arrange payment plans when necessary.

✔️ Officially deregister when closing or liquidating a business.

Remember: Tax compliance isn’t static – it requires ongoing attention to avoid falling out of good standing.

The Cost of Non-Compliance

Neglecting tax obligations comes at a high price:

❌ Financial Penalties – Late submissions and underpayments attract hefty fines and interest.

❌ Legal Consequences – Serious violations could lead to criminal charges, fines, or even imprisonment.

❌ Business Risks – Non-compliance can block access to funding, tenders, and key business partnerships.

❌ Reputational Damage – Poor tax compliance can erode stakeholder confidence.

On the other hand, maintaining tax compliance has clear benefits:

✔️ Avoid penalties and legal trouble.

✔️ Qualify for tenders and supplier agreements.

✔️ Build trust with stakeholders and investors.

✔️ Streamline financial management.

✔️ Focus on growing your business, worry-free.

Professional Assistance: Your Best Compliance Strategy

Tax laws are always changing, and keeping up can be overwhelming. That’s why SARS itself recommends seeking professional tax advice to ensure compliance.

At Maverick, we help businesses navigate tax complexities with confidence. Our services include:

📌 Comprehensive Tax Planning – Proactively manage tax obligations.

📌 Ongoing Compliance Checks – Ensure you’re always in good standing.

📌 Efficient Dispute Resolution – Address tax concerns before they escalate.

📌 Expert Guidance on New Tax Regulations – Stay ahead of SARS requirements.

Stay Compliant, Stay Competitive

With SARS tightening compliance measures, staying on top of your tax obligations is no longer optional – it’s a business necessity. Whether you need a compliance check-up or full-scale tax management, our team is here to help.

💡 Need expert tax support? Let’s talk. Contact us today to ensure you’re fully compliant and ready for 2025.

Monthly Reporting: A Strategic Advantage for South African Businesses in 2025

Monthly Reporting: A Strategic Advantage for South African Businesses in 2025

by BusinessMonthly ReportingTax

As we step into 2025, many South African business owners are focusing on strategies to navigate the year ahead. One often overlooked yet critical tool is monthly reporting. Whether you’re a start-up, an SME, or an established enterprise, having a clear, consistent pulse on your financial and operational performance can make or break your business in today’s fast-paced environment.

Why Monthly Reporting is Essential

Monthly reporting isn’t just about compliance or ticking a box – it’s about empowerment. Here’s how it can transform your business:

1. Make Data-Driven Decisions

Imagine running a race without knowing your position. Monthly reports offer a snapshot of your business’s financial health, tracking cash flow, revenue, and expenses. With this data, you can:

  • Identify early warning signs of cash flow issues.
  • Adjust budgets proactively to avoid overspending.
  • Ensure each rand is being allocated efficiently.

In South Africa’s fluctuating economic climate, staying ahead of the curve is crucial. Regular tracking allows for nimble adjustments, keeping your business resilient.

2. Strengthen Strategic Planning

Entering 2025, many businesses are navigating shifting consumer trends and market demands. Monthly reporting helps you spot trends and forecast more accurately. For example:

  • Seasonal analysis can reveal opportunities for promotions during slower periods.
  • Tracking recurring expenses helps refine budget forecasts.

By understanding these trends, you can position your business to capitalise on opportunities and mitigate risks.

3. Build Stakeholder Confidence

For South African businesses, maintaining trust with banks, investors, and partners is key. Regular, well-prepared reports demonstrate accountability and transparency. This can:

  • Strengthen relationships with existing stakeholders.
  • Open doors to funding or partnerships when needed.

Consistent reporting shows you’re in control of your operations – a vital signal for credibility in competitive markets.

4. Simplify SARS Compliance

Navigating tax regulations is a constant challenge for South African businesses. Monthly reporting ensures you’re prepared for SARS submissions by:

  • Keeping your financial data up to date.
  • Reducing errors in provisional tax calculations.
  • Simplifying the preparation of annual financial statements.

Compliance becomes less daunting when you’re already organised.

5. Leverage Automation for Efficiency

Thanks to advances in AI and automation, generating reports has never been easier. Tools now allow for seamless data integration and error-free reporting. However, while automation simplifies data collection, the role of your accountant remains vital in interpreting and strategising around the data.

Setting Your Business Up for Success

As 2025 begins, consider integrating monthly reporting into your operations if you haven’t already. Doing so can help you:

  • Stay agile: Adapt quickly to challenges or opportunities.
  • Drive growth: Use data to inform decisions that fuel profitability.
  • Remain compliant: Avoid penalties or interest by staying ahead of SARS requirements.

Remember, monthly reporting isn’t just a task – it’s a strategic advantage. Reach out to your accountant or financial advisor to build a system that works for your business. Together, let’s make 2025 a year of growth, resilience, and success.

Are you ready to start? Let’s chat!

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Renewable energy tax incentives

by Tax

Government is encouraging investment in renewable energy—but as always, there are caveats… While this year’s Budget was largely devoid of surprises, Finance Minister Enoch Godongwana made one announcement that was widely anticipated following President Cyril Ramaphosa’s State of the Nation speech, and will hopefully help taxpayers alleviate some of the pain of dealing with loadshedding.

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Investment insights: Maximising interest returns

by Tax

Navigating the trade-off between liquidity and return.

Investors with a more short-term or undefined investment horizon often leave their money in a bank deposit of some sort.

Interest rates have been rising during 2022, making bank investments more attractive than they were in the past 12 to 24 months. The key challenge for these investors is navigating the trade-off that comes with investing money in the bank: yield (interest) vs liquidity.

How does the yield vs liquidity trade-off work?

Banks pay you a higher interest for accepting less access to your capital. When you invest in a bank call account, the interest rate is lower than when you invest in a bank notice deposit. Notice deposits in turn do not offer as much interest as fixed deposits.

The most popular notice deposit is a 32-day notice account which offers a higher interest rate than a call account, where the funds are available immediately or within 24 hours. Standard Bank currently offers interest of 4.8% for a 3-month fixed deposit, compared to 7.01% for a 12-month fixed deposit (for an investment of between R100 000 and R500 000).

Liquidity refers to how long you have to wait to get access to your money. The reason that banks offer higher interest rates for lower liquidity is that it allows the bank time to lend those funds out and earn a higher return. If all the funds invested in the bank were at call rates, then the bank would be limited in its ability to lend money out.

The other variable that impacts on the amount of interest a person can earn at the bank is the amount of money they will be investing. Investors with larger amounts earn higher interest rates than those with smaller amounts, even though they have the same liquidity.

Extending the Standard Bank example above; an investor with R5 million can earn 5.1% for a 3-month fixed deposit, and 7.05% for a 12-month fixed deposit. As one can see, this variable is not as powerful as liquidity where interest rates increase dramatically for the same investment amount, as liquidity reduces.

What alternatives are available to investors?

Investors who need to prioritise liquidity can consider the Corporate Cash Management offering we have in place with two of the ‘big 5’ South African banks. The rate is currently at 6.16% p.a. and will increase if interest rates increase. The funds are available within 24 hours, and we have several examples of where funds cleared in the client’s account on the same day as the paperwork was submitted for the withdrawal. Returns are the same irrespective of the amount invested, and the rate is net of a 0.30% administration fee.

The next option for investors is that of a unit trust money market fund. The cheapest fund available to our clients is the Allan Gray money market fund, which levies an annual management fee of 0.25% (plus VAT). The adviser service charge is also 0.25% for cash management solutions.

The latest 7-day rolling yield for investors is 6.55%, and is the same irrespective of the amount invested. Withdrawals can take up to 5 working days for funds to clear in the client’s account after a withdrawal instruction is submitted.

The above two investments are suitable for individuals, organisations, companies, and trusts.

An investment option with similar liquidity to money market investments is that of income and enhanced income funds.

Income funds offer a higher yield than money market, and they seek to protect capital over 1-month periods. This higher yield is because they also invest in bonds.

Bonds are different to money market investments in that they can experience a capital loss. The size of the loss is determined by the maturity of the bond. A bond that is close to maturing has very low capital volatility, but can be offering a higher yield than cash. This makes them attractive for those seeking yield and capital security.

The forward yield (expected interest to be earned over the coming year) is 6.88% for the Old Mutual Income fund. The return to the investor will however be different to this based on capital movements over the period.

Enhanced income funds look to maximise yield and pay less attention to capital protection compared to income funds. These funds typically look to protect capital over 3-month periods.

By increasing the term over which they protect capital, they can invest in bonds with longer maturities, and therefore higher yield. Investors who are chasing yield and can stomach some short-term capital fluctuation will therefore find these funds attractive.

The Gradidge-Mahura Income model portfolio is invested in several of these funds and has a forward yield of 9.23% as at the end of September 2022. The return to the investor could be higher or lower than this based on capital movements over the period.

The historical performance of the AG Money Market, OM Income and GM Income model shows that when interest is reinvested, investors have been rewarded for taking on additional risk over time.

WRITTEN BY CRAIG GRADIDGE

Craig Gradidge is an investment and retirement planning specialist at GradidgeMahura Investments.

 

While every reasonable effort is taken to ensure the accuracy and soundness of the contents of this publication, neither writers of articles nor the publisher will bear any responsibility for the consequences of any actions based on information or recommendations contained herein. Our material is for informational purposes and should not be construed as financial advice.

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Ring-fencing trading losses

by Tax

Top-rate taxpayers need to watch out for Section 20A

Section 20 of the Income Tax Act 58 of 1962 deals with the set-off of losses from a trade against other income.  In general, such set-off is allowed (see sub-paragraph (1)(b)), provided that the loss is incurred in the taxpayer’s own name (i.e. not in a company, CC, or trust).  The loss must also have been incurred with-in the Republic of South Africa to qualify for set-off.

The claiming of losses is subject to the provisions of Section 20A, the ring-fencing provisions.  This Section however only applies to taxpayers whose taxable income (before the setting-off of the loss) falls within the top bracket at which the marginal rate reaches its maximum (currently 45% at a taxable income of R1 731 601 per annum).

If a loss was incurred in a previous year, an individual taxpayer may be able to carry forward such loss even if no income was earned during the year of assessment.

This is in contrast with the rules applicable to corporate taxpayers, whereby there is a requirement for the taxpayer to carry on a trade (even if such trade resulted in a further loss) for the assessed loss to be carried forward.  If a corporate taxpayer does not continue to carry on any trade, the assessed loss brought forward from previous years is forfeited.

Definitions:

Assessed loss

An assessed loss arises when the deductions provided for under Sections 11 to 19 of the Income Tax Act exceed the income against which such deductions are entitled to be claimed.

Ring-fencing

This is the practice whereby an assessed loss from one trade may not be set off against the taxable income from another trade.  Under Section 20A, such losses may be carried forward, and provided that taxable income is derived from the same trade in a future year, the loss can be set off against such income (but not against any other income).

The Section applies only to individual taxpayers on the maximum marginal rate of tax, and also applies only to losses incurred from specific trades, which are:

  • sporting activities;
  • dealing in collectibles;
  • rental of residential accommodation (unless at least 80% thereof is used by persons who are not relatives of the taxpayer for at least half of the tax year);
  • showing of animals;
  • part-time farming or animal-breeding;
  • performing or creative arts; or
  • betting or gambling.

 

Trade

The term ‘trade’ refers to any active income-generating venture, interpreted in a fairly wide sense.

In terms of Section 1, a trade includes “every profession, trade, business, employment, calling, occupation, or venture, including the letting of any property and the use of or the grant of permission to use any patent as defined in the Patents Act 57 of 1978, or any design as defined in the Designs Act 195 of 1993, or any trade mark as defined in the Trade Marks Act 194 of 1993, or any copyright as defined in the Copyright Act 98 of 1978, or any other property which is of a similar nature”.

Although the earning of interest income is not specifically included in the definition of ‘trade’, the courts have held that earning interest does in fact constitute a trade, and any expenses incurred directly in the production of the taxable portion of such interest income would qualify for deduction against such income.

For example, if you manage to borrow money at 4% and invest it at 8% (ignoring the interest exemption for individuals), the interest paid can be claimed as a deduction against the interest earned.

WRITTEN BY STEVEN JONES

 

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 adviser for specific and detailed advice. Errors and omissions excepted (E&OE).