Tax season often fills many creatives – especially photographers – with much trepidation and panic. What is a tax writeoff? When do I have to register my business? AAAHHHHHHHHHHHHHHHHHHHHHHHH………
SA Women Photographers chatted to Wilma Agenbag, a SAIT-registered tax practitioner from Trust Accounting Services in Paarl for some answers to those burning questions!
• How important is it to register your business for tax purposes if you hardly make any money from photography? (And also have a full time job paying PAYE).
If you have a PTY (registered company), then you should be registered for personal income tax as well as for your PTY (registered company).
If you do your photography as a sole proprietor in your own name and not a PTY, then you should declare the income (after subracting expenses) on your personal tax return, as this income would push you into a higher income tax bracket.
• How much do you need to earn as a business before having to register for tax for business?
The moment you start earning income (whether as an employee or self-employed) you need to register for income tax.
Income tax for the 2019 tax year (01/03/2018 to 28/02/2019) under the amount of R78 150 (profit or total income) is exempt from taxation, with everything above that being taxable at different tax rates.
This amount changes yearly, so contact your tax practitioner for more information.
• Does one have to have a registered business before asking money? Or can one just record the income and add to personal income on the SARS yearly income?
No. You can just record your income and expenses and add to your personal income on the tax return.
On the return there is an option where you indicate whether or not you derive income from another source other than an IRP5 – this opens the income and expenses which then needs to be done and only the profit at the end is added to your income for tax purposes.
• If one were to either sell an image or go over and provide a photographic service overseas, how would I handle the tax around this?
All income from overseas needs to be declared in SA and are taxable and is subject to the exchange rate at the time.
Income from overseas can be very complex as there are a few variables that influences this, such as on the duration of time you spend outside of South Africa and the type of income (full-time, freelance, etc).
But for the purpose of this article, all overseas income is taxable in South Africa.
• How do I tax? That is my question.
The moment you earn money you need to be registered for income tax. You are then taxed on your income less allowable expenses. Depending on the outcome of this sum you will either pay or not pay income tax.
(In other words, if your total yearly income falls below the tax bracket as answered above, then you do not need to pay tax but you still need to be registered for tax nonetheless. Find a tax practitioner, says Grethe…)
• I’d like to know which things I can deduct from my tax, as I’ve heard you’re meant to add receipts for petrol and even for meals if done under the title of “business” . I know this sounds like a stupid question but someone told me I can even submit the invoices for my dog’s medication from the vet (I have no clue if that’s true or not lol), so I’d like to know from someone who knows what they’re talking about what qualifies as tax deductions?
All expenses relating to the forth-bringing of your income you can deduct. i.e equipment, repairs and maintenance of equipment and vehicle, fuel used for business, stationery/office supplies, meals at shoots, subcontractors (second shooters etc.) travel and accommodation (if paid by yourself) short term insurance, telephone/cellphone, internet, office furniture, depreciation on equipment and furniture.
Sadly not the dog’s meds and food! (There is an exception though, if you live on a farm and the dog is a guard dog that is used for security on farm then you may be able to write Woefkardoes’ expenses off!)
• Who can set all of this up for me?
Your tax practitioner! (I’m going to go ahead and punt Trust Accounting Services one more time! 😉 )
• How screwed am I if I haven’t registered yet and haven’t been paying tax for my business and what do I need to do to fix it?
This depends on a couple of things:
• Depending on the entity, is it a PTY or Sole Proprietor. Both need to be registered for income tax – in other words, the PTY and yourself must be registered individually.
• In both instances the income and expenses need to be recorded per tax year from the start of business. Then depending on the profit per year can be seen whether there is tax payable or not. (This would then determine if you are screwed or not! 😉 )
• To fix it is simple. You need to get registered (if not yet) and then submit the relevant forms – your tax practitioner (or us!) can help with this.
• Can you please correct me if I am wrong. If you work full time (be it in photography or a different field), i.e. you are employed by a company and have a monthly salary and thus pay tax each month, and then you make money freelancing as a photographer in addition to this monthly income, you need to declare this additional income when you do your tax return (even if the amount extra you are making is below the taxable amount).
Because combined with your monthly income, it pushes your total earnings up.
Yes this is absolutely correct. The freelancing income less allowable expenses = taxable profit which is added to your salary income for tax purposes.
• When I lived in South Africa and was freelancing as well as working full time, I always declared my extra income (included it on my tax return) because my dad’s accountant told me I had to. (Luckily my friend is an accountant and she was able to help me with my return.) However, I knew other people who worked full time and freelanced and didn’t declare their freelance income. So I just wanted to check what the specifics are. Thank you!
You are correct. You are required to declare all income – salary and other!
How does tax apply for a small business in the case of:
• Hardware/assets in your business: This is capital expenses and can be used as straight deduction/expense if under R7000. Over R7000 it is only capital and then it is deduction over period of 4 to 6 years as depreciation. Depreciation is a deductible expense against your income.
• Losses or stolen items: Losses and stolen items is direct expenses against your income, unless you received compensation from insurance to replace property/equipment.
• Expenses such as petrol, food or drinks for a shoot and other expenses for a shoot: These are all expenses that can be claimed against your income. (In other words, a deductible expense.)
• Is an invoicing system enough to show as your income, do they want to see all of those things or do they trust that you will pay what you have to?
It is always best to keep copies of your invoices (income and expenses) for good record keeping, as well as being prepared in the case that SARS should decide to audit your business.
• 5. If business slows down and there is a tax year that you are under the bracket, what then?
You still need to submit your tax return even if you are under the tax bracket.
If business picks up the next year and the previous year was not submitted, then SARS will request the previous year anyway. You also open yourself for penalties of R250 per month per tax year for non-submission.
• Someone said that SARS doesn’t see what happens in your bank account, is that true? Is it safe to leave tax until over a certain amount?
SARS has no insight into your bank accounts unless there is major fraud, in which case SARS can request your bank statements via a court summons.
If you however earn interest on investments at a bank or elsewhere, SARS will receive that information directly from the bank/institution by means of an IT3 showing the amount of interest received for the tax year, as well as the capital balance.
It is best to do your taxes each year and not leave till later to avoid penalties and interest being charged by SARS.
• Do I need to submit tax as a sole-prop if I don’t make 1 mil a year? Do I need to be registered for tax? Honestly I don’t even understand tax at all. Please help!!
Yes you do. The moment you start earning income you need to register for income tax either as sole proprietor (individuals need to be registered anyway) or as business entity. The R1 million per year does not apply to income tax, but it does apply to VAT.
• What is the difference between VAT and Income Tax?
VAT = Value Added Tax – 15% on almost everything that we buy.
You only need to register for VAT when you derive income from a business the moment that your turnover of said business is R1 million per year.
VAT is then calculated as follows: You charge VAT on your invoices (ie Services R 100 + VAT = R115), whereafter you deduct all the allowable VAT paid by you on your expenses. For instance if your VATable income was R115 and your VATable expenses was R57-50 the sum would be R115 less R57-50 = R57-50 this has an VAT amount of R7-50 (R50 + VAT).
ONLY the R7-50 needs to be paid over to SARS. (The other way round is when your allowable VAT expenses exceed the income then calculation is the same but the excess VAT the you paid more than your income will be paid back to you from SARS.)
Income Tax: this is personal tax paid on your taxable income from personal and business income. Taxable income is the sum of all income less all allowable expenses. You pay tax on all taxable income that exceeds R 78 150 per year for the 2019 tax year (01/03/2018-28/02/2019).
This amount differ every tax year, but your tax practitioner should inform of you of this every year. Other than deductions for business expenses, you also deduct the medical tax credit (if you have medical aid) as well as annuities (if any).
Contact Wilma Agenbag at firstname.lastname@example.org for more information!