Monthly Archives: August 2015

Capital Gains Tax and the sale of a property

A1Capital Gains Tax was introduced on 1 October 2001. Capital Gains Tax is payable on the profit a seller makes when disposing of his property.

What is meant by Capital Gain?

A person’s capital gain on an asset disposed of is the amount by which the proceeds exceed the base cost of that asset.

What is base cost?

The base cost of an asset is what you paid for it, plus the expenditure. The following can be included in calculating the base cost:

  1. The costs of acquiring the property, including the purchase price, transfer costs, transfer duty and professional fees e.g. attorney’s fees and fees paid to a surveyor and auctioneer.
  2. The cost of improvements, alterations and renovations which can be proved by invoices and/or receipts.
  3. The cost of disposing of the property, e.g. advertising costs, cost of obtaining a valuation for capital gains purposes, and estate agents’ commission.

How was base cost of assets held calculated before 1 October 2001?

If the property was acquired before 1 October 2001 you may use one of the following methods to value the property:

  1. 20% x (proceeds less expenditure incurred on or after 1 October 2001).
  2. The market value of the asset as at 1 October 2001, which valuation must have been obtained before 30 September 2004.
  3. Time-apportionment  base cost method. Original cost + (proceeds – original cost) x number of years held before 1 October 2001 divided by the number of years held before 1 October 2001 + number of years held after 1 October 2001). 

How is Capital Gains Tax paid?

Capital Gains Tax is not a separate tax from income tax. Part of a person’s capital gain is included in his taxable income. It is then subject to normal tax. A portion of the total of the taxpayer’s capital gain less capital losses for the year is included in the taxpayer’s taxable income and taxed in terms of normal tax tables.

How is Capital Gain calculated?

If you are an individual, the first R30 000 of your total capital gain will be disregarded. Then 33.3% of the capital gain made on disposal of the property must be included in the taxable income for the year of assessment in which the property is sold. When the property is owned by a company, a close corporation or an ordinary trust, 66.6% of the capital gain must be included in their taxable income.

Primary residence and Capital Gains Tax

As from 1 March 2012 the first R2 million of any capital gain on the sale of a primary residence is exempted from Capital Gains Tax. This exemption only applies where the property is registered in the name of an individual or in the name of a special trust. The property should furthermore not exceed 2 hectares. If the property is used partially for residential and partially for business purposes, an apportionment must be done.

If more than one person holds an interest in a primary residence, the exclusion will be in proportion to the interest held by each party. For example, if you and your spouse have an equal interest in the primary residence, you will each qualify for a primary residence exclusion of R1 million. You will also be entitled to the annual exclusion, currently R30 000.

This article is a general information sheet and should not be used or relied on as 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 financial adviser for specific and detailed advice. 

 

Appointing a financial manager: Do you know what to look for?

A2Ideally the candidate to appoint as financial manager must be qualified for the post in terms of sufficient knowledge and relevant experience. There is, however, a third consideration which are often overlooked or not considered to be of the same importance as knowledge and experience, and that is soft skills. The rest of this article will discuss each of these three considerations in more detail.

Qualifications required

A formal financial qualification e.g. a bachelor’s degree is the minimum educational requirement for a financial manager. Depending on the level of complexity of the busniness’ finances, a post graduate degree or a professional qualification e.g. Chartered Accountant, might also be necessary.

Being a member of a professional organisation related to a candidate’s financial qualification can help to ensure that his/her knowledge is up to date with current financial standards and legislation.

Experience required

Appropriate work experience is usually a requirement but it’s not always possible to find someone with the ideal experience. If a candidate does not have ideal experience, try to determine if he/she has any relevant theoretical knowledge, is eager to learn and able to absorb new information quickly.

Soft skills required

Being a financial manager requires you to work with people in order to reach the business’ financial goals. If a candidate does not have the necessary soft skills, he/she won’t be able to manage the people below them successfully.

Consider testing of candidates on the shortlist by a psychologist to determine which of them have the best fit for the job in terms of personality and soft skills before making the final decision on who to appoint as financial manager.

Ultimately, you probably won’t find the ideal candidate with exactly the right knowledge, experience and soft skills you are looking for. It is highly likely that you will have to compromise on something with each candidate. If you have to choose between two people where one have the knowledge and experience but not a positive attitude, and the other one lacks some of the knowledge and experience you want, but have an excellent attitude, it might be better to hire the person with the right attitude as they can always get training to gain knowledge, but you can’t really train someone to have a better attitude. In short, appoint for attitude and train for knowledge.

To determine a candidate’s general attitude and handling of situations involving, amongst other things, conflict, pressure and staff problems, ask how he/she handled these kind of situations in the past. It is widely accepted that past conduct is in general a good indicator of future conduct.

Other basic soft skills that would be required in the role of a financial manager are:

  • Communication skills: Good listening skills and can explain complex information in a way that other people can easily understand
  • Organizational skills: Able to manage time, people and money
  • Attention to detail
  • People and leadership skills: Is assertive but kind and sensitive towards employees and able to motivate people
  • Problem-recognition and problem-solving skills: Ability to identify and overcome unexpected issues

A word on following up of qualifications and work references

If possible, go to the trouble to confirm that a candidate indeed have the qualification(s) and membership status he/she claims to have by following up with the relevant tertiary institutions and professional bodies.

It is extremely important to follow up on the references supplied by candidates. You can gather valuable information about a candidate’s general work habits and attitude that might not be available through other sources.

Appointing a financial manager can be an expensive and time-consuming exercise and have a significant positive or negative influence on the future of the business. Take the time to do the homework and make sure you pick the best possible candidate for the job. If none of the candidates is a good fit for the post of financial manager, it could be worth your while to advertise again and conduct a new round of interviews until you find the most suitable candidate.

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or ommissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice.

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Do you use a monthly financial checklist? If not, you might miss something important!

A3The primary purpose of business is to generate positive cash flow and make a profit, both of which are determined by two factors: money coming into the business and money going out of the business. As long as the money coming in is more than the money going out, you will be smiling. But what if the scenario changes and money going out is more than money coming in?

Will you even know if your business is not making a profit and/or generating enough cash to stay afloat? If you check the financial figures sporadically you might pick up that something’s going wrong eventually but then it might be too late to save the business. If you check the figures religiously once or twice a month and make comparisons between months, you will discover quickly when profitability and cash flow changes for the worse, and you will be able to take steps to rectify this sooner rather than later and have a fair chance of saving your business.

Checking up on your business’ financial affairs at least every month is a good business practice that will help you as a business owner/manager to stay on top of what’s going on in the business. It is crucial to stay in touch with what’s happening elsewhere in the business especially if you are not involved in the day to day running of the business or if the business have grown and you had to delegate some of your workload to others.

Using a checklist regularly and interpreting the results accurately, enables a business owner/manager to get a bird’s eye view of the business in a relatively short period of time. Some of the most important points which should be included in a monthly financial checklist are:

  • Check that accounting software is updated
  • Make sure financial data is entered into the accounting system regularly and accurately
  • Ensure that stocktakes are performed regularly and reconciled with accounting balances; follow up on discrepancies between the counted stock and the theoretical stock balance on the accounting system; be on the lookout for damaged and/or obsolete stock which must be removed from the accounting system
  • Consider implementing a policy of invoicing clients for goods and services as soon as it has been delivered to them
  • Check all bank reconciliations (including petty cash and investments), and follow up on discrepancies and long-outstanding items on the bank reconciliations
  • Check debtors’ reconciliations and follow up on long outstanding amounts
  • Check creditors’ reconciliations and compare with approved list of suppliers; follow up on long-outstanding items on the creditors’ reconciliations
  • Implement periodical asset stocktakes and reconcile results with fixed asset register
  • Review salary records for reasonability of salary deductions, timely payment of PAYE to SARS, etc.
  • Draw up a budget for a future period and compare the actual results for that period with the budget – investigate any material variances between budgeted and actual amounts, keeping in mind that a budget is a forecast and will never be 100% accurate

Indicators of the financial health of a business are calculated from the financial reports and financial statements. By paying attention to these indicators and comparing them from month to month, you will be able to spot trends in the business and the industry in which it operates, and take appropriate action if and when required.

No two business’ checklists will look the same as every business is unique so use caution if you use a standard checklist that has not been customised for your unique business setup. Lastly, make sure you know how to interpret the results you get from working through the checklist otherwise the use of the checklist will just be a waste of time.

If you would like to implement the use of a monthly financial checklist in your business or improve the financial checklist you are currently using, do contact your financial adviser for professional assistance and advice suited to the specific needs of your business.

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or ommissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice.

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SANBS Blood Drive – Acknowledgement

24.08.2015
Thank you to : Newtons Accountants 

Dear Newtons Chartered Accountants

We would like to take this opportunity to thank the donors for attending our blood drive at Newtons Accountants on 31.07.2015.

The number of donors who donated were 10.

  • Janeske du Toit
  • Thelma Crossman
  • Refiloe Makhetha
  • Nico Shannon
  • Joelene van der Westhuizen
  • Helensha Cilliers
  • Chantelle Schnuir
  • Alicia Loots
  • Wayne Beelders
  • Siseko Tose

This excludes donors who were unable to donate.

Your continued support and willingness to host blood drives is highly appreciated.
Please communicate our thanks to all involved.

Yours sincerely,

Natalie Booysen
Public Relations Practitioner