Finance minister Pravin Gordhan delivered a small business friendly budget.
Following last month’s budget by finance minister Pravin Gordhan, business owners and business support organisations are cautiously optimistic.
The finance minister announced that R6.5 billion would be allocated to small business support over three years.
Also of importance for business owners, specifically those with annual turnovers up to R1 million, are the proposed amendments to the turnover tax regime.
Headed by Judge Dennis Davis, the Tax Review Committee, which is currently reviewing South Africa’s tax policies, has proposed that businesses with annual turnovers of up to R335 000 should not be taxed. A further proposal was made that the maximum tax rate be reduced from 6% to 5%. As per the budget review, other proposals also include doing away with requirements that force businesses to opt in for three years and require annual – rather than biannual – tax returns.
According to Gordhan, the committee also found small business corporation tax to not have been effective, with only some 50 000 businesses benefiting through tax relief.
A recommendation has been made that this tax regime be replaced by annual refundable tax compliance rebates subject to certain – unspecified – conditions.
To assist with investment into small business, venture capital companies could also claim a tax deduction on their investment into these businesses.
Under consideration was a proposal by government to make grants received by small businesses tax exempt.
Small Business Connect spoke to business owners to hear what they had to say about budget 2014.
Business owner Themba Mashimbye says the minister knows that small business is the way to go if he wants to grow the economy.
“I feel that things are moving in the right direction for business owners, and I am happy,” says Mashimbye.
However, he says there is still a long way to go, and that government can do more to assist small business owners.
He was concerned about how exactly the money allocated to small business owners would filter down, and was not too hopeful that he would benefit.
Business owner Manelisi Lennox James, who owns Sinako Publishers, says he was impressed by the amount the finance minister allocated to small businesses.
With a turnover of R100 000 per year, James would most likely benefit from the proposed changes to turnover tax. “This will assist growth in my business and instead of paying more money for tax when my business is not doing well,” says James.
- Government payments to small businesses to be made within 31 days.
- R6.5 billion to support and development for small businesses over three years.
- Turnover tax regime to be amended. Proposed that business owners with an annual turnover of up to R335 000 should not be taxed and that the maximum tax rate be reduced from the current 6% to 5%.
- Recommendation that small business corporation tax be replaced by an annual refundable tax compliance rebate.
- Venture capital businesses will be able to claim a tax deduction on small business investment.
- Grants to small businesses to be tax exempt.
- Over R7 billion will be spent on conditional grants to provinces to support small holder farmers.