Author Archive: anthonyb@timslatter.com

Avoid crippling your finances

It is highly likely that one of your biggest assets is your earning power. It is vital to protect this asset and ensure you maintain a steady salary until you have reached your financial goals.

Many people take a head-in-sand approach when it comes to income protection, believing that they’ll never be inflicted with a disability, or assuming they can find a quick resolution if they are. However, this doesn’t necessarily equate to positive thinking, but rather naivety. A more responsible approach would be to hope that disaster won’t strike, while still having a back-up plan in place in case life has other ideas.

The truth is that a lot of circumstances are completely out of our control. And for most people, the reality is that losing a regular income stream (particularly that of the breadwinner) could potentially result in not being able to afford everyday items, such as groceries, as well as larger expenses, such as school fees and bond repayments.

If an unforeseen circumstance arises that prevents you from working, and you haven’t protected your income, you could immediately feel the blow and the knock-on financial effects for years.

Statistics highlighted in an article published on Money Marketing highlight that over a quarter of people will suffer a disability between their twenties and when they retire, and that 10 people per hour have a stroke in South Africa. Unfortunately, anyone can have a debilitating accident or develop a medical condition at any given time, so it’s important to safeguard our financial affairs in order to look after our liabilities and loved ones.

When it comes to disability cover, there are many options, but it’s advisable to choose the most comprehensive cover that you can afford. Fortunately, income protection benefits offer much more holistic protection nowadays, and can cover other claim categories, such as critical illness, hospitalisation and functional impairment. This is of particular note as, in 2017, almost half of the disability claims paid by a leading insurer fell under the classification of functional impairment.

You can easily reduce your financial risk exposure, protect your investments and ensure you can meet all your obligations by investing in comprehensive disability cover. A holistic disability cover will provide you with more certainty, so that you can rest assured that your financial situation is protected in all eventualities. Please don’t hesitate to arrange a meeting to seek advice on selecting the right disability cover for you.

(Info from moneymarketing.co.za)

Your health is your wealth

“It is health that is your real wealth” — Mahatma Gandhi

Many entrepreneurs and ambitious people are concerned with climbing the career ladder and building their wealth. However, as you get older or suffer bouts of illness, you will start to appreciate the true value of your health and not take it for granted. Although achieving your goals is understandably important, you don’t need to completely abandon your health in your pursuit of success.

It’s simply not worth sacrificing your physical or mental health for the sake of your financial health. It is as important to lead a balanced lifestyle as it is to have a balanced portfolio, and to treat your health like your savings plan by investing in it regularly.

Certain practices that are common in today’s high-paced world — such as eating lunch at your desk, going home after dark, not having enough sleep — won’t help you in the long run. Working over 12 hours, eating junk food, and only catching a couple of hours of shuteye each day isn’t a healthy way to live and can easily lead to burn-out or severe illness.

And, what’s the point in saving for your future if you’re not going to be able to enjoy it?

Many illnesses these days are stress-related or the result of an unhealthy lifestyle, and are actually avoidable. For example, Type 2 diabetes is a common example of an often self-inflicted disease. And even If you don’t immediately die from an illness, you could still suffer some serious side effects that can last into old age and may stop you from doing some of the things you want to do.
Ultimately, prevention is better than cure. Starting a retirement plan isn’t the only way to make sure you will live comfortably in your autumn years. You can also prepare for your future by taking good care of your health. Otherwise, all those years of chasing dollar signs could cost you dearly, and you could end up paying a much bigger price — financially, physically and emotionally.
If living a longer, healthier life isn’t enough motivation to start caring for your well-being, then see your health as another financial investment, as being healthy can actually save you money in the long run! The cost of medication, doctors appointments and hospital stays can add up to way more than the cost of gym membership, healthy meals and adequate insurance. It may cost a bit of extra money now to stay healthy, but it’s even more expensive to get sick.
Value your health, as you could do much better things with your hard-earned money than spend it on chronic medication and specialist appointments that could have potentially been avoided.
Just as your savings are your responsibility, so is your health. Small lifestyle changes — such as going on a daily walk or drinking a green juice instead of a Coca Cola — can make a big difference.

It’s simple really — exercise regularly, let food be thy medicine, get enough rest, and spend quality time with your loved ones.

And just as you get professional help with your investments, it can also be worth employing experts to help you to attain your lifestyle goals. A personal trainer or a nutritionist can guide you in making good choices, just as a tax consultant can advise you when it comes to filing your tax return.

Ultimately, you still need to do the real graft yourself, but a qualified professional can encourage you, as well as save you from making mistakes that can make it harder to achieve your goals.

Manage your health for the sake of your wealth, and realise the value of a healthy body and mind. As with many things, a bit of foresight and preparation can save you a lot of issues in the long run. Don’t hesitate to arrange a meeting if you wish to make any changes to your financial plan to ensure you can maintain a healthy portfolio that complements, rather than obstructs, a healthy lifestyle.

Females and Finance

This Thursday, 9th August is National Women’s Day, which marks the historic moment on 9th August 1956 when 20,000 South African women of all races showed that they would not be intimidated by unjust laws when they marched to Pretoria’s Union Buildings to present a petition to the prime minister against the carrying of passes. It was one of the largest demonstrations staged in the country’s history and, to commemorate the event, the first National Women’s Day was declared a national holiday in 1995 once South Africa was a democracy.

Since then, celebrations take place throughout the country on this day each year, and August has been declared National Women’s Month.

With various campaigns that have come to the forefront in recent times, such as #MeToo and #ImWithHer, women are more empowered than ever. However, there is still a long way to go in terms of female rights around the world, and women are still often subject to discrimination and inequality, not to mention harassment, in the workplace. According to research published in September 2017, female managers in the UK earn GBP12,000 less than their male counterparts, and the World Economic Forum believes that it will take 170 years to completely close the gender pay gap around the world.

South Africa is particularly guilty of this gap. A 2017 report run by a market research firm highlighted that women in South Africa earn, on average, 27% less than their male counterparts. And the report found that the difference is even wider when it comes to high earners, with men in top positions earning as much as 39% more than women of the same standing.

Experts believe that this pay inequality could be one of the reasons that many South African women are not properly prepared for retirement, as recent findings published in Fin24 have revealed that 32% of female South Africans feel unsure about their retirement plans, while men seem to be clearer about their long-term investments.

A survey conducted by Ellevest has found that women don’t invest as much or as early as men do, so women often retire with less money, even though they also tend to live longer than men. Many of the women surveyed were actually very clear on their financial goals — retirement, travel, and paying off debt were the top three priorities — but less than half of those questioned said they know how to achieve these targets.

The survey showed that the majority of women are dissatisfied with many aspects of their finances, such as their net worth, their investment portfolio, and their retirement savings. And less than half of the women surveyed felt satisfied with their financial knowledge. Furthermore, 48% agreed with the statement that “most women have to work twice as hard to get half as much,” and this double standard clearly needs to be rectified.

Taking control

Slowly times are a-changing and, in January 2018, Iceland became the first country to make it illegal for women to earn less than men in the same position. As women are gaining more and more control over their professional lives, they are also looking to take more control over their finances too. Experts believe that a key step to female empowerment is for more women to get involved in their family’s long-term financial planning.

Although gender discrimination is sadly still an issue in our society, it’s time for more women to take responsibility for their savings plans, including retirement preparation, which is often left to men.

Recent political and economic events across the world are forcing women to reevaluate their financial situations. Many women questioned by Ellevest admitted that putting away money for their financial goals would boost their confidence, and the survey showed that women clearly value the feeling of being financially savvy. According to the survey more savings equates to more confidence for many women — and is more important than salary and support in the workplace.

National Women’s Day pays homage to the women of South Africa who fought against the tyranny of the Apartheid government and helped to shape the country. Their march in 1956 when they delivered bundles of petitions containing more than 100,000 signatures was an inspiring display of political and inner strength, as well as female solidarity. Let this day serve as a reminder of the capable women who continue to pave the way forward; and let it give courage to women across the nation to realise their strength and to take control of their wealth portfolios.

(Info sourced from time.com, fin24.com and iol.co.za)

Tax practitioner services

Filing a tax return can be confusing and time consuming, particularly if you have more than one source of income or are eligible for several deductions.
As frustrating as bureaucracy can sometimes be, expressing your irritation to anyone at SARS will probably not get you far. If any issues arise, it’s best to contact SARS professionally in writing so that your discussion is recorded and can be referenced.

If you wish to relieve yourself of the burden of filing a tax return, it’s worth seeking professional assistance. Although you will need to pay a fee for the services of a tax practitioner, it can actually work out cheaper than having an entire claim disallowed or being issued with a penalty for an incorrect claim. Furthermore, the fees are likely to be deductible against your taxable interest.

Registered tax practitioners

If you do decide to seek support in submitting your tax return, it’s important to only hire an accredited tax practitioner who is registered with SARS. They should also be registered with an approved controlling body, such as the South African Institute of Tax Professionals, as a controlling body ensures that members are up-to-date with their personal taxes, don’t have criminal records, and have the necessary qualifications to accurately file other people’s taxes.

It is your responsibility as a taxpayer to ensure that any tax practitioner you use is accredited and registered. Only a registered practitioner can legally complete a return on your behalf (you will need to sign a power of attorney form), as well as maintain your details and register you for new taxes.

If you get audited, the tax practitioner should also be able to handle the audit on your behalf. This is often just a matter of submitting supporting documents to SARS, which they will already have. Be sure to choose a professional who you feel confident will be there for you if you have any trouble with SARS at a later date. Someone with an office number and an office address, as well as an online presence, will likely be your best bet in this regard.

It’s advisable to do your research before choosing a practitioner, as a bad one could end up costing you a lot more than just their fee. Before deciding who to use, ask them some questions. Firstly, find out if they are registered with SARS and with which controlling body. If they are registered, they will have a SARS practitioner number, as well as a membership number with their controlling body.

Every tax return is different so it is best to make sure your practitioner has experience dealing with something similar to your particular situation. If you have a basic return with only an IRP5, then most tax practitioners should be able to file it easily. However, If you have investments or earn rental income, then your tax return may be a bit more complicated and require more expertise.

A good practitioner is likely to ask you some questions in order to gain an understanding of your personal tax situation. Your answers will enable them to inform you what documents you will need to submit, so that you can avoid doing things piecemeal, which could delay the filing of your return and your tax refund.

Do also be aware that good tax professionals usually file their clients’ returns electronically, either using SARS’ e-Filing system or specialised tax software. Filing returns electronically rather than manually is much quicker (so you will get your money much quicker if you are due a refund), and it also minimises room for human error.

Fees

Rather than asking a practitioner what their fees are, ask how they calculates their fees. The fee is likely be based on the complexity of your tax return and how long it will take to file it.

It’s important to not agree to a contingency fee, which is when a practitioner calculates their fee based on a percentage of your tax refund. Do note that this practice is prohibited, as it is argued that it encourages practitioners to try to claim more money than is actually due — be that through under-declaration of income or inflated deductions.

Financial yoga

You don’t have to be able to do a headstand or salute the sun every day to appreciate the benefits of yoga. Now, this isn’t to say that everyone needs to start a daily practice, but it can be helpful to recognise that we can learn a lot from this ancient discipline.

When you practice yoga, you are not only studying the asanas (postures), but you are also honing valuable life skills, such as flexibility, balance and mindfulness. This Thursday, 21st June marks International Yoga Day and is a time to reflect on how yoga is to be lived, not just performed. What you learn on the yoga mat can be applied to several contexts — including your financial situation.

With this in mind, here are 7 tips to help you to achieve a more zen state of mind when it comes to your financial affairs.

1. Set your intentions

Yogis study yoga not just to master a posture, but to use the posture to understand and transform themselves.

Before starting a sequence, many yogis take a moment to connect their minds to their bodies and set an intention — such as ‘relax’, ‘persevere’, ‘accept’ — that they would like to bring into their practice (and life). Doing this brings awareness to what you are seeking, and helps you to direct your energy towards aligning your actions with what you want to achieve. When it comes to your financial situation, being clear of your intentions can help you to commit to achieving what is important to you.

There is no competition in yoga, so it’s important to keep your focus on your own practice and self-development. To do this, it can help to find a focal point on which to rest your gaze in order to gain more stability. As in yoga, find your focal point in your financial life, as this will help you to remain steadfast even during the most challenging times. When you are faced with fears or conflicting options, focus on what you are trying to achieve so that you can stay on track to meeting your goals.

2. Be prepared

In a yoga class, there tends to be a build-up towards the more difficult postures, which come towards the end of a session. Otherwise your body may not be able to do them properly without injury. Firstly, you need to warm up your muscles, and open your hips or stretch your hamstrings, to be prepared for the final, more challenging poses in a sequence. Preparation is an important part of the flow and helps you to progress.

The same applies to your finances. Once you have decided on your long-term financial goals, you can be prepared and work towards them over time.

3. Find your balance

When you assume a posture, you need to find your balance — and this may not always be where you would expect it. For example, rather than centring yourself over your whole foot, it can help to rather shift your balance over your toes or your heel. How you find your balance can subtly change a posture and your attitude towards it.

Balance is also key when it comes to approaching your wealth portfolio. What small changes can you make to readdress your state of affairs and make your financial situation easier to maintain? Don’t be afraid to adjust something to find a better balance, or change any habits that are making you uncomfortable.

4. Be flexible

If you practice yoga regularly, you are likely to become more flexible — both physically and mentally. Saying you are not flexible enough for yoga is like saying you are too dirty to take a bath, and many yogis believe that it is often not the body that is stiff, but the mind.

Increasing flexibility can help to improve your life and your financial situation greatly, as circumstances change and obligations arise, so it’s important to be flexible. If you can adapt your spending habits for the sake of your financial future, you stand to be much more comfortable in the long run. Being financially flexible on even small things, such as how many coffees you buy each week or how many times you eat at a restaurant, can have a notable impact on your overall budget. Work on your flexibility and strength, and you’ll learn to bend so you don’t break.

5. Find your edge

Yoga is a balance of holding on and letting go; control and surrender. During a yoga practice, you are faced with deciding when to push yourself further and when to accept you are at your limit. The pose begins when you want to get out of it, and it’s often a question of breathing through any discomfort to the extent that your body allows. A large part of the process is working out how far you are able to move into a stretch — if you don’t go far enough, you may not progress, but if you go too far without listening to your body, you could end up causing yourself injury. There is a point between these two places where you can find that balance, and that is known as your ‘edge’. The edge is where challenge and acceptance go hand in hand.

From a financial point of view, it’s a matter of finding a balance between your income and expenditure, and how much you spend and save, so that you can strengthen your situation without hurting yourself. Find your edge and push yourself to your limits comfortably.

6. Take care of yourself

Yoga is not just about self-improvement, it’s also about self-acceptance. It is important to release anything that does not serve you and look after yourself so that you can live a healthy and happy life.

By taking care of your financial well-being, you can avoid the stress of being in debt, and ensure you have enough saved for your retirement. A bit of self-care now can help you in the long run.

7. Be mindful

Mindfulness is about being aware of the present moment and living in the now. In yoga, holding a posture, or paying attention to how your body moves through a sequence, can help you to remain present.

Mindfulness is a question of self-mastery. The moment your mind turns elsewhere, it’s easy to fall off balance. And focusing your mind can help with your finances too — be that committing to a budget or saving for a goal.

Practice yoga on your finances as often as possible. And don’t forget to breathe…

5 tax return tips

Brace yourself — the start of income tax season is nigh, which means it’s time to prepare to file your tax return. It’s worth always trying to submit your tax return sooner rather than later, as being efficient can save you standing in line at SARS at the last minute if any problems arise.

As a provisional taxpayer, it’s important to register and declare all sources of income to SARS, along with a workings table to show how you arrived at the total submitted. Do be sure to accurately file all proof of interest and income, such as your bank statements and payslips, as well as any proof of allowable deductions, such as medical certificates and retirement annuities. You are legally required to keep all supporting documentation for five years, so find a safe place to put everything you have collected.

By ensuring that you submit all relevant documents from the get-go, you can avoid an arduous audit later down the line. And if you are audited, you can save yourself a lot of hassle by submitting all requested documents straight away. Allow 30 working days before following up on an audit and keep the reference number to hand in case SARS take longer than their permitted 90 days to provide feedback.

A feature on the eFiling website is an inbox, to which taxpayers will receive direct correspondence from SARS. This inbox is also a way for SARS to officially request any additional information, so be sure to read everything you are sent and act accordingly.

Although filing your return can feel like a chore, there are ways you can file your return to save you time, money and frustration this tax season.

1. Medical expenses

It’s advisable to submit all your medical expenses to your medical aid provider — even if you won’t be compensated for everything. The total amount will nevertheless be put on your certificate and could be considered for credits when you submit your return.

Keep all proof of payments for any medical expenses that you have incurred, as SARS will need to review when the amount was actually paid.

To claim any expenses that have not been paid by your medical aid, submit a summary of these expenses to SARS along with the 10 largest invoices and a statement that you can provide proof of other medical expenses if required (make sure you keep all of these invoices for five years).

2. Travel expenses

When it comes to travel claims, it is useful to keep a daily record of your travel expenses. Then you can complete your tax return in accordance with this travel logbook, rather than submitting a return and attempting to create a logbook from memory if you are audited.

If you have bought a car for business purposes, do not include any finance costs as part of the price you paid, as this does not form part of its actual value. Remember to submit the purchase agreement with your logbook when you file your return.

3. Home office expenses

Before you put in a claim for any home office expenses, be sure to have all the correct documents in place. These may include a letter stating that you work from home, expense documents, and a sketch of the property showing the designated area that you use for business.

It is important that there is a distinct demarcation between your office and your home. If you try to claim for any personal item in your home office, it will serve as evidence that you are not using the area exclusively for work. You should also be able to prove, if required, that you do not need to walk through your office space to your home, as then it could be argued that the office is not exclusively used for business, which could result in a penalty.

4. Rental income

Make a summary of your rental income, and deduct any costs you have incurred to generate this income. This includes estate agent fees, levies and rates, and repairs and maintenance costs. However, do note that you cannot claim capital expenditure, but you can deduct wear and tear costs.

5. Retirement annuity

If you don’t already have one, consider getting a retirement annuity as this is tax deductible. Don’t hesitate to arrange a meeting to discuss the best ways you can save for your retirement and make the most of any tax benefits.

What you need to know about tax season

Along with the chill of winter, the opening of income tax season next month may send shivers down your spine. The official date from which you can file your tax return (ITR12) this year is Sunday, 1st July 2018. From that point, taxpayers can start submitting their 2018 personal income tax returns for the 2017/18 tax year, which runs from 1st March 2017 to 28th February 2018.

Due to the country’s flailing economic growth and its huge budget deficit, SARS is under extra pressure this year to meet revenue targets. If you earn a taxable income from a salary, commission or fees, you will need to pay income tax. And if this income is above the tax threshold for the past year of assessment, you should register as a taxpayer with SARS and file a tax return online via the eFiling system. If you are younger than 65 years old, this threshold is ZAR75,750 and it increases to ZAR117,300 if you are between 65 and 74 years old.

Although you need to register if you are above the threshold, it’s worth noting that if you have just one employer and your gross salary for the full year of assessment is under ZAR350,000 then it’s not compulsory to submit an actual return. This is provided that you don’t have any additional sources of income and don’t wish to claim any allowable tax deductions, such as for medical expenses or retirement annuities. If you are unsure about whether you need to submit an income tax return, please send us a quick message with our form, email or phone.

If you earn any income other than your salary, then you are a provisional taxpayer, which means you have to file provisional tax returns, known as IRP6s. For provisional taxpayers, tax season normally runs from July to November. There are three periods — the filing and payment of your first provisional tax is due on 31st August (this represents 50% of your estimated annualised tax liability). The second installment is then due on 28th February (this is the other estimated 50%) and then you will need to pay any remaining balance by 30th September after you have worked out the actual tax liability for the year.

Documents required

To complete the process, you will need to prove your income by submitting documents, such as an IRP5/IT3(a) from your employer or pension fund, financial statements, tax certificates for investment income, and tax-free investments certificate(s). You will also need to show proof of any allowable deductions, such as medical aid contribution certificates and receipts, retirement annuity contribution certificates, a travel logbook if you receive a travel allowance or use a company car, and information pertaining to any withheld foreign tax credits.

If you visit a SARS branch to submit your return, rather than completing it online via eFiling, then be sure to bring a proof of identity, such as your ID, passport or driving licence.

SARS is reportedly striving to provide good services to taxpayers during tax season by implementing additional security measures for those who need to change any personal details (taxpayers will be required to show their ID, scan their fingerprints, and have their photo verified by Home Affairs).

It is advisable to use the eFiling platform to submit your tax returns as this can be accessed 24/7 and is the easiest way to submit a return. Any eFilers can also make use of the free Help-You-eFile service by clicking on the Help-You-eFile icon and following the steps to be put in touch with a SARS agent who can hopefully be of assistance. Furthermore, don’t hesitate to arrange a meeting to discuss any of your obligations and how they could affect your financial situation.

Why you need life cover if you have a bond

When applying for a home loan, one vital aspect to carefully consider is life cover or mortgage protection cover. This will ensure that you can continue to provide your dependants with a roof over their head if you pass away, or become disabled and cannot work.

If you are the main income earner, but don’t have appropriate life cover or mortgage insurance, you could leave your family in a world of financial hardship after your death, or create complications that could have been easily avoided. As any financial planner will agree, this area of a financial portfolio is one of the first building blocks to be put into place.

Life Insurance 101

A bondgiver is the person paying the bond, while the bank is known as the bondholder. In the event of the death of the bondgiver, a lack of life cover can make a very distressing situation all the more tragic. Families who have lost a member, who is responsible for paying the home loan, can face the very real possibility of losing their home.

According to an article published on Fin24, “life cover or life insurance is a means of ensuring that money is available to settle all outstanding debts and provide dependants with financial security in the event of the death or disability of the person whose life is insured. The cash sum paid out can be used to settle debt like the home loan that could then allow dependents to keep their home. Mortgage protection insurance, another type of life cover, is limited to provision of cover for the home loan only.”

South Africa

In spite of its arguable importance, taking out life cover or mortgage protection to cover a home loan is not always compulsory and, in our stressed economy in which more than half of credit active customers are considered to be credit impaired, many South African homeowners opt to forego this option in order to avoid additional monthly costs.

Many people choose to take a gamble and pray that they won’t be the victim of a life-changing incident, and that it won’t have a negative impact on their situation or their families if they are. According to a survey conducted by FinScope, this risk-taking tendency led to only 15% of South African consumers buying life insurance products in 2013. Although the Timetric report shows that the life insurance sector grew at a compound annual growth rate of 12.1% from 2012 to 2016, the lower economic growth that was expected until 2019 has meant that the life insurance sector hasn’t expanded as quickly as need be. Ironically, many South African adults are believed to have funeral cover, but few of these have life cover, and even fewer have disability insurance.

South Africa is not alone in its pitiful mortgage protection statistics, but the low figures do point to a possible lack of understanding among bondgivers about the essential nature of life cover. The crux of the matter is that, if you are a homeowner with a bond, it is important to have life cover in place so that your family will be protected in the sad event of your passing. A small monthly installment can save your family from massive financial pressure in the future, while not paying now can end up costing them dearly.

Don’t leave these things to chance — be proactive and ensure you have taken the necessary steps now to protect those you love after you’re gone. Don’t hesitate to arrange a meeting to discuss how you can secure your family’s financial well-being.

Business assurance matters

It is highly advisable that anyone who runs their own business takes out business assurance, which is a broad term for a range of life assurance products that are designed to cover various scenarios and requirements.

Running a successful business often takes considerable financial investment, but many business owners fail to plan for what happens in the event that they die, become disabled or severely ill; or if they lose one of their key employees for one of the same reasons.

However, it is essential to consider all risks in order to avoid adverse consequences for the business, and your dependants, as often a family’s financial health is intertwined with the health of a business. This blog serves as an overview to how this product could bolster your portfolio, but for your specific needs it is always best to setup a meeting for us to chat directly to your situation.

What is business assurance?

Generally speaking, business assurance is risk and/or investment assurance that will protect a business in the event that someone essential to the operation — be that an owner, a director or a key employee — dies or becomes disabled.

Business assurance not only protects those involved against potentially dire financial consequences, but it can also be used to prevent any main employees from leaving to work for a competitor by providing them with a policy that will mature to their future financial benefit.

Arguably, one of the principal purposes of business assurance is to ensure that a business can continue to be fully operational after an unfortunate loss of a key player, so as to protect the owner(s) and their dependants from financial hardship.

The last thing you would want in the event of your passing would be to leave your dependants or your business in dire straits. This is particularly the case if your business has an overdraft, which you have secured in a personal capacity. The appropriate assurance product will allow you to rest assured that any loans will be repaid when you die, so that your loved ones won’t suffer further. When setting up a business, it is, therefore, vital to carefully consider all financial risks, and take the appropriate measures to negate those risks.

Business structures

One of the most important aspects to consider when setting up a business is its ownership structure, as whether you choose to structure your business as a sole proprietorship, a partnership, a close corporation (CC), a company, or a small business corporation will determine the type of business assurance you will need.

All of these types of business structures have different implications when it comes to financial planning, and each business assurance product has different tax consequences that must be taken into account.

For example, there will be more tax obligations for a sole proprietor at death than someone who is a shareholder in a company. It is, therefore, extremely important that a sole proprietor ensures that any debts — including income tax and CGT — can be paid in the event of their death, so as not to leave debts to their dependents.

Most businesses tend to consist of three distinct levels — the owner, the management, and the employees. All involved parties have particular risks and financial needs that can be covered by a business assurance product.

The consequences and financial risks of each business structure should be carefully analysed to establish what type of business assurance is needed. This will require regular valuations and cash flow assessments, as well as taking into consideration any tax obligations and capital investment borrowings.

Question time

Business owners should ask themselves some hypothetical questions when it comes to making necessary arrangements for business assurance. Can your family still draw an income from the business if you die? In the event of your death, how can you unlock the value of your shareholding for your family’s benefit? Will there be any conflicts of interest between your family and business partners that you need to mitigate before your passing?

In the event that you cannot simply leave your business to a family member to run, it’s wise to ensure that you have done all that you can to guard your heirs against any risks, rather than leaving anything to chance. Usually, in the event of death, your share of a business would become part of your estate — but other people involved may have different ideas, and it’s best to avoid any unnecessary complications if possible. Written agreements, as well as appropriate life assurance and disability cover, can help a great deal in this regard. If you structure your policy holdings well, you could even save in terms of capital gains tax and estate duty, so it is important to make sure you correctly implement and structure your financial plan so that your loved ones can reap the most benefits possible.

Don’t hesitate to arrange a meeting if you wish to discuss your options and their implications.

International Day of Families

In 1993, the United Nations General Assembly proclaimed that 15th May should be observed each year as the International Day of Families. The aim of this annual observance is to increase awareness of family-related issues, and to help countries to tackle these problems with comprehensive policies.

The United Nations states that this day “reflects the importance which the international community attaches to families as basic units of society, as well as its concern regarding their situation around the world.” The aim of the day is to mobilise action in countries across the globe, and to offer the opportunity for people to speak out about and demonstrate support of varying family issues in different societies.

2018

In 2018, the annual observance takes the theme of Families and Inclusive Societies, which aims to explore the role of families and policies in advancing the 17 Sustainable Development Goals, which include achieving gender equality, eradicating hunger, and providing clean water and sanitation for all.

These were adopted in September 2015 with the aim of ending poverty, protecting the planet and ensuring prosperity for everyone. For these world-changing objectives to be reached, it is important that everyone plays their part — that doesn’t just mean governments, international organisations, world leaders and the private sector, but civil society in general and each of us as individuals.

Here is a list of actions that you can do in your daily life to contribute towards a sustainable future, make an impact and be part of the solution (some of these can even be done from the comfort of your sofa).

In the good ol’ R. of S.A.

Every year, this day (2 April) is an occasion to promote a better understanding of the social, economic and demographic processes affecting the family unit. In South Africa, the family plays an important role in society, and nothing is arguably more important than making sure your dependents are safe, happy and healthy — while you’re still alive and after you’re gone.

In a country where divorce, unemployment, crime and health issues are rife, cover for dependents is more important than ever, and it’s advisable to do thorough research about what and who your medical aid policy will cover. Many schemes will cover you (principal member), your spouse (adult dependent) and children (child dependents) as members; and the same members should be covered if you take out a medical aid gap cover policy too. However, many factors determine who can be added to your medical aid scheme as a dependent. A dependent is classified as someone who depends on you financially, or who cannot take care of themselves due to a physical or mental disability — this does not need to be a blood relative, but you will need to be able to provide proof that they are dependent on you.

Medical aid schemes can vary on the age that they define children as becoming adults, but for most schemes, this tends to be at 21 years of age. The child can remain classified as a ‘child dependent’ for longer — even up to the age of 27 — If the parent can prove that the child is still dependent on them, be that because they are studying or unemployed.

If a child is included under a parent’s membership and the parent passes away, the dependent’s cover as a minor will remain valid so long as premium payments are maintained. In this case, children can often maintain the status of dependent until the age of 26, which will mean they are covered throughout university and early employment.

Many feel it important to ensure that their dependents will be taken care of after they’ve gone. If you are one of these people, do take the appropriate measures to cover any debts in case you pass away, and make sure you have the necessary life assurance products to cover you and your family in the event of a tragedy. A bit of planning and preparation are key to ensure that you have all your bases covered, so that you can rest assured that your loved ones won’t suffer any adverse financial consequences after your death.

The overarching goal of days such as International Day of Families is to make us realise the importance of what we often take for granted, and to review and rectify our situation so that we can protect those we love in the long-run.

Let’s pave the way this 15th May for an inclusive society that can work together towards sustainable development and look after each other for posterity.