zombie, Author at Harbour & Associates

Most entrepreneurs feel that their company is too small to consider an Employee Share Trust. This is often not the case and there are some definite advantages to consider. The benefits are motivation of staff and improving your B-BBEE rating. Let’s look at them – Motivation We all know how important it is to have dedicated, motivated staff. Now, the very best of staff are not motivated principally by the possibility of reward, which is why any bonus system is unlikely to work. In fact, bonus schemes are generally demotivational because bonuses frequently fall below expectations or have to be…

Of course, it is only those who expect to become reasonably wealthy that should form a trust, but for them it’s never too soon to start. You could be forgiven for thinking that the time to form a trust is when your assets (particularly the shares in your company) are about to gain sufficient value that their sale to the trust would result in your having to pay Capital Gains Tax or before the value of residential properties owned by your company grows above R900 000 since the sale of the shares to a trust leads to Transfer Duty as it…

Once upon a time, you could sell the shares in a company that owned fixed property and only pay Securities Transfer Tax (1/4%). Then in December 2002 it all changed. That was a long time ago, but many people still don’t understand the full implications, so here they are – A Residential Property Company is one which owns a dwelling or dwellings and their fair value exceeds 50% of the assets of the company, excluding financial instruments. If shares in that company are sold, then the shares are treated as fixed property and the sale attracts Transfer Duty, not on…

I often get a call from someone whose creditors or spouse are after them and he or she urgently needs a shelf trust so that he/she can move their assets into it to protect them. That is exactly what trusts cannot do. It’s the word “move” above that is the problem. There are only two ways to move assets into a trust. You can either donate them or sell them to the trust. Let’s look at each of these in turn. Donating your assets The problem here is Donations Tax, which is 20% of the total value of your donations…

With the 2019 Budget speech behind us, Estate Duty has gone from 20% to 25% on the amount by which an estate exceeds R30m. That’s five new reasons for holding assets in a trust. But really? Is anyone who’s sharp enough to accumulate R30m not going to have woken up to the idea of a trust? The answer, amazingly, is yes. There are such people out there. I’m currently finalising a business plan for a client who wants to buy a very profitable 28 year old dealership for, guess, R30m and the seller owns the shares in his company in…

I recently had a client who wanted to buy a professional business plan from me for submission to the NEF for a business loan. Now that is not an unusual request – I’m usually busy with about six business plans at any one time. What made this one different was that she could give me no data to work from. Just imagine. You want to acquire about R2m from an NEF loan to start a shuttle service and you have no idea what turnover you expect, how many…

I continue to be disgusted by those amongst my fellow members of the auditing profession who have not told their clients that their company no longer has to be audited. It was the new Companies Act of 2008 (which actually only came into law in 2011) that changed things. If your company is owner managed and not doing hundreds of millions of turnover a year, then no audit is necessary. You don’t even have to prepare fancy financial statements. Owner managed simply means that the directors are the shareholders and (in the opinion of most professionals) still applies if a…

There are several taxes that you need to be familiar with if you invest or trade in fixed property. Income Tax The seller will pay Income Tax on the sale of property which was bought (and perhaps renovated) with the object of selling at a profit. The taxable income will be added on top of any other taxable income earned by the seller before calculating the total tax (at 28% for companies and up to 45% for individuals). Capital Gains Tax (CGT) The seller will pay CGT on the sale of property which was bought (and perhaps renovated) with the…

I’ve previously written about the new rules relating to interest free or low interest loans to trusts, but the final amendment changes the game yet again and you could be in for some bad news. Here are the salient points most likely to affect you. 1) The section now applies to trusts or companies in which the trust owns at least a 20% interest. 2) The difference between the interest calculated at the official rate (currently 7,75%) and the interest actually charged is now deemed to be a donation and subject to Donations Tax (currently at…

So there’s a business or a property out there that you want to buy. Why not keep it simple and buy the company that owns the business? The advantage is that you get the assessed loss, if there is one, to set off against future profits. You might also pick up a shareholder’s loan account that will enable you to draw tax free money out of the company rather than drawing a salary. Don’t be tempted! The risk that you will later find some skeletons in the cupboard far outweigh the above benefits. For example, the company may have signed…

I’ve always believed in keeping it simple and encouraged clients to rather have common shareholders in separate companies than have a holding company in which the various parties own shares. But there’s one clear exception – Let’s say you have a very profitable company in a high risk business and the company is owned by your trust. Is the trust at risk? No, but the profits are stuck in the company unless it declares dividends to the trust. So now, after the deduction of the Dividends Witholding Tax (DWT at 20%), the trust sits with 80% of the cash. What…

SWOT analyses (Strengths, Weaknesses, Opportunities, Threats) have been around for years. I always thought they were a bit of a gimmick, but later on, I saw their value. This was when I realised that the Weaknesses and Threats could be used to create Opportunities. You’ll recall my recent article called Blessed Crises? What makes a crisis blessed? The fact that it stops you in your tracks and forces you to re-plan your future. You can use a SWOT analysis to do the same thing (and it’s a lot less painful). My big weakness was that I…

Casual importers and exporters do not need an Import/Export registration in order do send or receive international shipments. They can use their Income Tax registration number in place of an import/export number. I learned this from a shipping agent during a meeting with a client. They tell me that only habitual importers/exporters need to register. If you do need to register we can make it painless by doing the registration for you. It takes about two weeks.

Every contract that you sign will require you to state your domicilium citandi et executandi (Oh, how attorneys love their latin!). Stop right there! You are about to fall deep into a trap. The meaning of the Latin is roughly “the place where legal notices can be served on you”. Never, ever, ever give a street address as your domicilium, because if you do, and you subsequently move from that address, any summonses or other legal notices in respect of that contract will be served at a place where you, or your company no longer resides. You won’t even know that…

I had to go to the SARS Tax Practitioners’ Unit in Pretoria, then on to the Import Export Unit downtown Pretoria. The parking at Tax Practitioners is great, but downtown, it is positively dangerous and you can only find illegal parking “protected” by self appointed car guards. I’ve always had to take a chance, but when I mentioned it to Helen, she suggested I leave my car at Tax Practiitioners and Uber to Import Export, do my business, then Uber back to my car. Now why didn’t I think of that?…

There are three things in life that are certain – death, taxes and uncertainty! I spend lots of time advising about the first two, but what can we do about the uncertainty? I’ll frequently find myself in a meeting with a youngish entrepreneur, say 28 years old. We’ll be setting up a trust, planning his or her investment strategy, avoiding taxes on death, protecting assets against creditors and generally trying to avoid making the numerous mistakes that I’ve made in my life. Actually, planning…

The most important advice that I give to students who come to me for free mentoring is how to pass their exams. Before reading this post, read a newer one which sets the scene. Most of them think that the purpose of an exam is to demonstrate to the examiner how much they know of or understand the subject. Wrong! An exam is a mark scoring exercise. Nothing more, nothing less. I owe this to Charles Huttingh who helped me through Honours/CTA and the Board Exam. So how to pass your exams – 1) I have…

I bought a house in Malvern for about R275 000 at the sheriff’s auction in 2010. I paid cash, then raised a bond for R300 000. The property pulled in R14 000 a month so everything was going swimmingly. Then, in 2013 it was hijacked. The highjacker had started running a creche at the house and was making a killing, so when I got an eviction order, he agreed to pay rental. That lasted for a while, then he stopped paying again. Meantime the creche was using an enormous amount of water and he didn’t pay me for the municipal…

I’ve always said that financially you must plan to live forever. Most of us won’t live as long or as comfortably as we could because of stupid things we did or the good things we didn’t do when we were younger. Here are some of them – But first, the context. I am 75 years old. I guess that on average, I meet one new person a day at my offices, where I consult at no charge. It is guaranteed that anyone over 60 looks and acts older than me, so I guess I’ve earned the…

Despite the negative perceptions of auditors following the KPMG blow out, the Institute of Chartered Accountants (SAICA) is the professional body that I respect most (I am governed by three – auditing, SAICA and engineering). They recently published an article by Bowman Gilfillan on the growing trend towards resistance to paying taxes – follow the link, go to Current Issue and click on Article 2642. If you feel the way I do, you’ll enjoy reading it, so I decided to share it with you. They mentioned “Civil disobedience”. We’ve seen that working against e-tolls, so we know that South Africans can pull…

Author: zombie

It’s never too soon to form a trust

Transfer Duty on sale of a company owning residential property

What a Trust cannot do

Five more reasons why the wealthy must have a trust

What a Business Plan Isn’t

Don’t pay for an audit

Property Investment and Related Taxes

Low interest loans to trusts now have some bite

Buy the business not the company

When is a holding company a good idea?

Is SWOT of any real value?

You don’t need an Import/Export registration to import or export

Beware the Domicilium Citandi et Executandi

Über Alles

Five things you can do to plan for an uncertain future.

How to pass exams

How I got rid of my last bad investment property

Ten steps to longevity

Resistance to paying tax