Harbour & Associates

I’m often asked to help someone form a trust so that they can save on tax. My first response disappoints them, because a trust does not save any tax in the short term, unless you abuse its purpose and use the conduit principle to syphon income out to low taxed beneficiaries. And even that can easily fall foul of s7 of the Income Tax Act. My second response, however, always wakes them up. If you build wealth in your own name, or even worse in a company that you own, then you will lose a third or more of it…

I guess the first question is why would you want to? I can’t think of many good reasons, but these are thoughts that come to mind – Your trust is registered as a taxpayer and you’ve read my book “16 Steps to Wealth”. Now you know that you were ill advised and prefer a trust that is not registered. Your trust doesn’t actually exist, because the initial cash donation was never made or banked. Now you want a valid trust. You have a messed up structure in the old trust and can’t figure out a way to clean it up.

My understanding of the POPI Act is that it is illegal to send unsolicited communications to anyone except your customers, who must always be given the option to opt out. So, why are we still receiving offers of loans, notices of webinars and courses, offers of services and all that email junk that we were getting before POPI? Well, the answer is quite simple. This is South Africa. In this country, if there’s a problem a law will be passed to make it illegal. Problem solved. On to the next one. And that is literally the end of the story!…

So many people plan to form a company without knowing what the differences are. So, here we go – Shareholders are the owners of the company. They have no say in how it is run and the only decision they make is who they appoint as the directors. Directors are appointed by the shareholders to run the company for the benefit of the shareholders. There are two types of director – Executive directors are employees of the company and earn salaries Non-executive directors are not employees of the company. They sit on the Board and receive directors’ fees. They take part…

When the new Companies Act came into effect back in 2010, it ceased to be possible to form a CC, but existing CCs were, and still are, allowed to remain in that form. What many people don’t realise is that a CC is not the best form of business entity. It has been surpassed by the (Pty) Ltd company. The main differences are – nobody knows who are the shareholders (owners) of a company. This information is not registered with CIPC, only on the share register at the registered office of the company. the members (owners) of a CC are…

The cheapest way is to form the company yourself as the only cost is the R175 fees payable to CIPC. The problem with that is that you still have to produce the share certificates, share register, obtain a tax clearance if needed and a B-BBEE affidavit if needed. It’s our 50th Anniversary so, for fun, we’ve dropped our fee to R475 which includes the CIPC fee, so we get R300. And you get the share certificates, share register, a tax clearance and a B-BBEE affidavit. Other service providers are currently charging about R2 000, which is our normal fee. But…

Your trading company can only qualify as an SBC if the shareholders are all natural persons. There are other conditions, but this is the one that I want to deal with today. Because of this, you would normally want yourself to be the shareholder rather than your trust. But you do want your trust owned investment company to have the profits in order to invest them. How do we do that? It’s a bit of a balancing act. The investment company rents assets (computers, vehicles, furniture etc.) to the SBC. You have to leave enough profit in the SBC to…

I have often said that it is cheaper to rent than to own your own home. I have also often said that the best form of investment is residential property for rental. So, how can these two apparently contradictory statements both be correct? Let’s first talk about renting rather than owning. Why is it cheaper? Because the people that we rent from did not make good investments. Their ROI can be as low as 3,5%. Usually they are either renting us a property that was at one time their residence and had been bought for that purpose, or they were…

So, why get married under an ANC rather than in Community of Property (COP)? Isn’t the latter fairer to both spouses? That depends on the type of ANC contract that you sign. There are two possibilities and I have compared them with COP – With accrual. This is, by far, the most common arrangement and is totally fair in my view. The two parties declare in the contract, what assets they have prior to the marriage. These assets remain uniquely theirs and are not shared by the other party. However, any assets added subsequent to the marriage are separately owned…

Despite my having written an article stating that you cannot change an NPO into a normal company, somebody booked a meeting to discuss how she could do exactly that. She was a “no show”, so I never found out what it was all about. But it almost certainly meant that she did not understand the difference between the two types of company. There’s just one difference – an NPC cannot distribute dividends to its shareholders either in cash or in kind. Now, how many private companies declare dividends? I’ve known about 10 in all of my 36 years with…

It seems there’s a need for further clarity, particularly regarding Donations Tax, Exempt Institutions and PBOs (Public Benefit Organisations). You will have read in another article that certain non-profit entities may register at SARS both as an Exempt Institution (EI) and as a PBO. So what is the difference and how does that affect taxes? Exempt Institutions do not pay Income Tax. They may still have to pay Donations Tax as well as PAYE, VAT etc., depending upon their nature. Public Benefit Organisations are exempt from Donations Tax. Also a donor to a PBO does not pay Donations Tax…

Probably not. Why? Because the trust deed almost certainly states that the trust was founded by a donation of R100 from the founder to the trustees, on behalf of the trust. It is not formed by the process of registration at the Master’s Office. Let’s see what happened to the R100 in your case. The Trust Properties Control Act states that whenever the trustees receive money, they must open a bank account in the name of the trust and deposit the money into it. And there’s the problem. Can you produce a bank statement showing that deposit of R100? If…

I have had some informative experiences recently regarding the price sensitivity of our products. It’s our 50th anniversary, so, I used that as an excuse to drop our price for company registrations to R175. Just enough to cover the CIPC fees. The reason that I did this was a realisation that we make our money from servicing companies with registrations, bookkeeping, payroll, returns, B-BEE affidavits and a host of other services. So why not just give them away and that way we increase our potential client base for our other services. We were inundated. I had to stop the special…

Have you noticed that SARS claim to be only 25 years old? It’s on their website when you log in. And here’s Harbour and Associates celebrating 50 years – And still many people don’t know that we are accountants! So let’s put the record straight. Here’s what we do – Financial statements with or without review Formation of trusts Formation of companies Personal and company tax Bookkeeping Payroll VAT B-BBEE affidavits Company secretarial Registrations Wills Business plans But, most of all, what we do is stand by you. I’ve been meeting people at no charge for something like 10…

I’ve already written two articles on owning your home vs. renting it. Here’s one and here’s the other. But now we have a new take on the subject. We sold our house about 5 years ago and have rented on an annual basis ever since. The result is that we are now living in our 5th rented property, a beautiful house in Knysna. Our garden flows into a forest and because the trees are on a steep downward slope, we look over them to the lagoon and, further away, the Outeniqua mountains. Paradise! However, there are three downsides…

Did anybody notice? Woolies are selling some very well known and respected wines in 2L boxes as an alternative to bottles. I’ve listed the price per 2L, the (resulting cost of 750mL) vs the cost of a 750mL bottle Diemersdal Sauvignon Blanc R169 (R64 vs R85) Pierre Jordan Tranquille Blush R140 (R53 vs R70) Beyerskloof Pinotage R200 (R75 vs R100) La Motte Merlot R189 (R71 vs R90) De Wetshof Limestone Hill Chardonnay R219 (R82 vs R109) Spier Cabernet Sauvignon R190 (R71 vs R95) Alto 1693 R240 (R90 vs R120) Every one of them represents a discount of 25% on the cost…

I get so many people wanting to buy a shelf trust because they need to sign an offer to purchase urgently. Why? Because the seller has given them a deadline! What’s wrong with this scenario? Firstly, they should be buying the property in a company of which their new trust will become the owner. They clearly haven’t read my book “16 Steps to Wealth“ Then, they are not following one of the basic principles of successful property investment – you must not want anything badly. If you get the wants, you will not buy well, and don’t forget that…

When planning an Asset for Share swap using the s42 provisions in the Income Tax Act, you will see that the shares have to be new issues, not existing shares. As we invariably want all of the shares to be owned by a trust, we find it best to use a new company. The way an Asset for Share swap works is the new company issues 100% of its shares to the trust in return for an asset or assets (usually fixed property). There is no tax against this transaction. No CGT, no Transfer duty, no tax. There are, however,…

We moved from Johannesburg to Knysna just over a year ago. Apart from the change of climate, scenery and available hiking trails, the big difference that we found was the air quality. There’s an App called AirVisual that shows the Air Quality Index of any place in the world based on a scale of 0 (zero polution) to 500 (you’re all dead). Here’s what we often see in Knysna And here’s why we are happy to have left Johannesburg – Knysna usually sits around 10 or less, whilst Jo’burg runs from 30 odd to 180! It’s a…

Think about how often you base a decision to buy upon a website or facebook page. You’re on holiday and need to choose a restaurant. You search and find several alternatives. From what you see, you decide which one you fancy and book a table. You need a plumber. You search and find several alternatives. From what you see, you decide which one you can rely on and make a call. You want to buy a gift on line. You search and find several alternatives. From what you see, you decide which one to buy and from whom. What are…

Blog

How do trusts save on tax?

How can I shift all the assets of one trust into another?

Why hasn’t POPI stopped those unsolicited emails?

What is the difference between shareholder, director and member?

Can I still form a CC?

What does it cost to form a company?

How to pull the profit from a Small Business Corporation into a trust structure

Why invest in property if renting is cheaper than owning?

Anti Nuptial Contracts

Why would you want to change an NPC to a (Pty) Ltd company?

Donations Tax, PBOs and Exempt Institutions

Does your trust exist?

Does price matter?

We’re twice as old as SARS!

Own your home, or long term rental or AirBnB

Woolies great box wines

The seller wants to sell!

What is the difference between an s42 company and an ordinary company?

Sinusitis? Persistent cough? Check your air quality!

When did you last look critically at your website?

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