1st QUARTER 2009 VOLUME 13

CAMERON & PRENTICE MERGER WITH GG

WEST: BUSINESS AS USUAL, ONLY BET TER
Effective from 1 March 2009, Cameron & Prentice merged with G.G. West
& Company. Antonie van der Hoek outlines what this exciting step means
to our clients.

Over the past few years Cameron & Prentice has In particular we look forward to the input from Boryana
established strong systems that are now operating like Mintcheva and Shaun Fisher, partners at G.G. West &
a well-oiled machine. And the merger with G.G. West & Company. Both are young and dynamic and excited
Company means that we will now be able to work with about the merger. Boryana Mintcheva studied Micro
greater productivity, improved turn around times, be Electronics Engineering at university in Bulgaria before
better able to keep up with the ever-changing legislation she came to South Africa in 1992. She joined G.G.
and take on larger audits. West & Company in 1996 and went on to qualify as a
Chartered Accountant and obtain an MBA from UCT’s
Cameron & Prentice, located in Pinelands, was Graduate School of Business, in 2005. Shaun Fisher
established in 1971 as a small firm with a handful of joined the firm in May 2005 and became a partner in
clients and a promise to keep things personable. This March 2006. Shaun qualified as a Chartered Accountant
ethos is very similar to the way G.G. West & Company in 2004 and has a Postgraduate Diploma in Income
has conducted business over the last 57 years, and Tax Law from UCT. He has recently completed a BCom
which will continue under the Cameron & Prentice brand. Honours in Taxation also from the University of Cape
Town.
The combined team of G.G. West & Company and
Cameron & Prentice will be a blend of experience and Both firms are equally optimistic at the prospects
youth where the partners will work very closely together of beginning a new era. We wish to emphasize that
and actively practise the concept of knowledge sharing. there will be minimal disruption to the clients of both
predecessor firms and we look forward to seeing you at
our premises at 4 Glen Roy, Pinelands.

WHAT’S IN
BUDGET BRIEFS
Getting down to detail

NEW DIVIDENDS TAX

Soon to replace Secondary Tax on Companies

ARE YOU A STRONG LEADER?

What it takes to be great

MAKE A BUSINESS PLAN

And make it good

MINIMIZE ESTATE DUTY

New law will pleasantly surprise
 IN BRIEF - Budget 2009 Special
Primary rebate increased

The primary rebate has been increased from R8 280 to R9 756 a

year for all individuals. The secondary rebate for individuals over
65 has been increased from R5 040 to R5 400 a year. This means
that the tax-free income threshold for individuals under 65 years
of age has increased from R46 000 to R54 200 and the tax-free

ED’S DESK
income threshold for individuals over 65 years of age has increased
from R74 000 to R84 200.

Tax-deductible contributions

The monthly monetary caps for tax-deductible contributions to

Budgets and financial year end medical schemes have been increased with effect from 1 March
– this time of year is hot in every 2009 from R570 to R625 for each of the first 2 beneficiaries and
sense of the word. Come 1 March from R345 to R380 for each additional beneficiary.
and we all settle in to yet another
financial year. And hopefully, the Tax-free interest ceiling increased
temperatures will cool off as well.
The tax-free interest income ceilings have been increased from
On 1 March however, we merged R19 000 to R21 000 for individuals below the age of 65 and from
with G.G. West & Company in what R27 500 to R30 000 for individuals over the age of 65. The tax-
we believe is a very good match. free ceiling for foreign dividend and interest income has been
Both firms hold impressive track increased from R3 200 to R3 500.
records and both have an ethos of
personalized service. We can’t wait. Rollover relief

SARS has proposed the introduction of “rollover” relief in respect

In this issue David Warneke and
of “entities with inactive real estate” such as vacant land and
Shaun Fisher wrestle with the
residential property. We envisage that this relief may be similar
changes that the new Dividends
to the relief available on the introduction of CGT that allowed the
Tax will bring about. It makes for
tax-free transfer of properties out of companies, CCs and Trusts.
complex reading and the team at
As this proposal has not yet been enacted, we do not at this stage
Cameron & Prentice is on standby to
know what the detail of the proposal will involve. We will again
assist you with any queries you may
advise in this regard in a future issue of Ampersand.
have regarding this important topic.

Peter Prentice demonstrates how

the Revenue Laws Amendment
Act, 2008 has created another
opportunity to minimize estate
duty. We also take a look at how a
poorly written business plan often
results in businesses not getting
the funding that they, in many
instances, deserve.

With the tough economic times

that businesses are experiencing at
present, good leadership is vital.
We include an article that we believe
lists the most important qualities
that characterize a good leader.

Until next we meet…

Ed
IN A DITHER OVER DIVIDENDS TAX
In terms of the Revenue Laws Amendment Act, the new Dividends
Tax could result in an increased tax cost where an employee share
trust holds shares in its parent company. Shaun Fisher highlights the
conundrum.

From time to time, employee share

trusts hold shares in their ‘parent’
company. These are shares that
have not been allotted to a qualifying
employee in terms of the share
scheme for which the trust was set
up. For example, the shares may
have been issued to the trust in
anticipation of take-up by employees
who will qualify shortly thereafter,
or the shares may have been
repurchased from an ex-employee.

At present, if the parent company

declares a dividend, Secondary Tax
on Companies (STC) is payable
thereon by the company at the flat
rate of 10%. Where the dividend
is in respect of the shares held by
the employee share trust, there is
no STC exemption. However, STC is
calculated on the ‘net amount’ of any
dividends declared by the company.
The net amount is the excess of the
dividend declared over the dividends
accrued to the company during its
dividend cycle. If, as is normal, the
company is one of the beneficiaries
of the trust and the trust distributes
the dividend back to the company,
the company will get an STC credit
in respect of the dividend accruing
to it. This credit will be taken into
account in the next dividend cycle of
the company resulting in a benefit to
the company when it next declares a
dividend.

In terms of the Revenue Laws It is considered that the company Where the trust remains the
Amendment Act, the situation will will be the beneficial owner of the beneficial owner of the dividend, the
be different when the new Dividends dividend if the trust deed makes it company will be out of pocket as
Tax comes into effect. The Dividends clear that the dividends from such the new Dividends Tax contains no
Tax will not apply where the shares HAVE TO be on-distributed ‘input credit’ mechanism. In effecting
‘beneficial owner’ of the dividend is a IN TOTO to the parent company such changes to trust deeds, the
SA resident company. If the trust is i.e. the trustees should be given implications of the new general
the ‘beneficial owner’ of the dividend no discretion whatsoever as to anti-avoidance provisions should be
the tax will apply but if the parent how to utilize the dividends. This is borne in mind.
company is the ‘beneficial owner’, equivalent to the company having a
the Dividends Tax will not apply. ‘vested right’ to the dividend.
STC CREDIT SHOCK WITH NEW DIVIDENDS TAX
The recently promulgated Revenue Laws Amendment Act introduces
a new Dividends Tax to replace Secondary Tax on Companies (‘STC’)
from a future date still to be determined. David Warneke takes a
closer look at an unintended result of the wording of the legislation.

The Explanatory Memorandum gives The basic problem with section 64I is
the following example: that it does not require the payment
of an exempt dividend to use up a
Facts: company’s STC credits. So in the
Company X has two shareholders example above, since the dividend
(SA Company and Individual) paid to SA Company is exempt from
that each hold 50% of its shares. the Dividends Tax, there would be
Company X has R400 of STC no need for Company X to call on
credits (i.e. has received R400 of its STC credits in order to apply the
dividends previously subject to STC). STC credits against the dividend.
Company X distributes R600 to its Company X would therefore not
shareholders by way of a dividend. be able to issue the notification
regarding the reduction of its STC
Result: credits and SA Company would
Of the R600 dividend, the dividend therefore not have STC credits (as
tax does not apply to the first R400 defined), to use against the dividend
by virtue of the existing STC credits. received from Company X.
Of the remaining R200, R100 is
The major difference between allocated to each shareholder Section 64I(3) deals with the
the Dividends Tax and STC is (meaning that the R100 paid to SA reduction in STC credits, and states
that, whereas STC is a tax on the Company is exempt and the other that “…the amount by which the STC
company declaring the dividend, R100 paid to Individual is taxed at credit of a company is reduced is
the Dividends Tax is a tax on the 10%). The R400 of STC credits is deemed to be equal to an amount
shareholder that will be withheld, similarly split, with the SA Company which bears to the dividend paid
and paid over to the Revenue receiving R200 of STC credits and by that company to the person
Service, by the company. Both are Individual receiving R200 of STC contemplated … the same ratio
at the rate of 10%. The basics of credits (which will be permanently as the amount by which the STC
the new Dividends Tax have been eliminated). credit of that company is reduced
outlined in the previous edition of as a result of the payment of that
Ampersand (Edition 12 – 4th Quarter However, it does not seem as if the dividend to all shareholders bears
of 2008). This article discusses an Act, as presently worded, will effect to the total dividend paid to all
apparent unintended result that this result. shareholders.”
will arise due to the wording of the
Act, where companies with STC The mechanism by which the This apparent deemed reduction in
credits declare dividends to South R400 of STC credits is meant to be the declarer’s STC credits in fact
African resident companies. Under passed up to the shareholders is does no more than offer a formula
these circumstances it appears as if contained in section 64I. In terms for the apportionment of a reduction
the STC credits will be of no use to of section 64I(1)(b) the company in STC credits between shareholders.
either company: the declarer of the declaring the dividend has to notify It hinges on “the amount by which
dividend or the recipient thereof. the shareholder of the amount by the STC credit of that company is
which the dividend reduces its (the reduced” without requiring that the
Where companies have received declarer’s) STC credits. This amount STC credits be reduced.
more dividends than they have is correspondingly defined by section
declared i.e. where they have STC 64I(2)(b) to be an STC credit in the The implication is that STC credits
credits, the current wording of the hands of the recipient company. will be of no use whatever where
Act does not appear to allow for the a dividend is paid to a SA resident
STC credits to ‘work themselves up On the other hand, the proposed company as beneficial owner.
through a chain of South African section 64F exempts dividends from
resident companies’ as stated in the the Dividends Tax, inter alia where Hopefully we will see an amendment
Explanatory Memorandum to the the beneficial owner is “a company to Part VIII before the Dividends Tax
Revenue Laws Amendment Bill. which is a resident”. comes into effect.
WHAT MAKES FOR AN A WORD OF ADVICE
even the best laid plans…

EFFECTIVE LEADER?
Even businesses that have strong
potential will fall by the roadside
if their business proposal plan is poorly
written.
Generally business plans are drafted for
In these tough economic times it is more vital than the purpose of seeking financing. That
ever that a business enjoys strong leadership. means that the document must a) get
the reader’s attention quickly, b) keep
The following are the most important qualities their interest, and c) convey critical
information in a manner that is easy to
according to Sandra Larson (the past executive
understand.
director of MAP for Nonprofits):
Many requests for financing are
rejected simply because the business
Passion. plan is poorly written, incomplete or
A good leader must be passionate unrealistic. It is critical to pay close
about his or her company’s attention to detail and include all
business. This enthusiasm is information that the reader will need in
contagious and inspiring to others. order to make an educated decision.

There are a number of common

A Holder of Values. mistakes made when writing a
A good leader must have values business plan, including: the failure
that, in his or her opinion are life to fully express the business concept,
giving to society. However they the omission of important pieces of
must also have respect for others information, and a tendency to be
and their views. unrealistic in their financial and market
share assumptions and projections.
Vision. Other pitfalls include:
Ideas about change and how the
Poor grammar and spelling
future could be different is essential
A failure to provide supporting
to ensuring the sustainability of any
documents as needed
organisation. A lack of clarity
Longwinded or unclear
Creativity. explanations
A creative leader helps with the Of secondary importance is: Arrogance that is evident in
formulation of the vision of the the document
company and includes the ability Planning Skills. Insufficient evidence to support
to come up with novel solutions to A good leader is organised. This the notion that the business can
problems. means that they are aware of what be successful
is happening within the company, A lack of enthusiasm for the
concept and the business.
Intellectual Drive and the environment at large and how
Knowledge. this affects their logistics.
A good leader has to be a reader It is important that the business plan
and a learner. In turn, this helps, Interpersonal Skills. is not seen as just words on paper. It
must represent what the business will
with the formulation of the vision. People need to clearly understand
do to be successful. It will become
what it is that they are required to
obvious very quickly if there is a clear
Confidence and do, be praised for their work and understanding and vision of how
Humility Combined. feel as though they are part of a the business will be managed, how
Without confidence, action will not motivated team. products or services will be produced
occur to transform the vision into and marketed, how the business will
reality. However, a good leader General Business Skills. make money and if there is a sound
must recognise that others may A good leader is also a jack-of-all- strategic direction for the business.
come up with better ideas than his trades. He or she needs to have
or her own - and embrace those skills in financial management, The business plan document must be
ideas wholeheartedly. human resources, information well organized and instill confidence in
the reader that the business has a good
management, sales, marketing and
chance of being successful.
A Good Communicator. more.
Good communication is essential in Contact us at Cameron & Prentice
order to convince others to come From ‘What Makes for an Effective on 021 530 8444 if you would like
on board and share the company’s Leader?’ Copyright Sandra Larson. to discuss our business plan services
vision. further.
REST IN PEACE
The Revenue Laws Amendment Act, 2008 has created another
opportunity to minimize estate duty. Peter Prentice explains further.

A newly created paragraph (i) of Section 3(2) of the Something to sleep on or keep you awake at night? Do
Estate Duty Act No 45 of 1955 applies to the estates of the sums, you will be pleasantly surprised.
persons dying on or after the 1st of January 2009.
P.S. 2009 budget windfall! It’s time to look at your will
This, in layman’s terms, means that your pension fund, again. Trevor Manuel indicated in his budget speech
provident fund and retirement annuity funds escape the that the portion of the Section 4A abatement, currently
estate duty net and are excluded from your estate for R3.5 million, not utilised on the death of the first dying
the purpose of calculating estate duty. Added to the spouse may be utilised on the death of the second dying
fact that most life assurance companies have scrapped spouse. This may translate to a saving of R700 000
the age limitation for entry into RA funds, you are now in estate duty. It might sound a bit complicated but
able to invest a lump sum into a RA fund which will be nothing compared to unravelling this provision for Jacob
immune from estate duty. Zuma and his many wives.

Q: What are the VAT implications of acquiring a same as the value of the fringe benefit for income tax
motor car? purposes. Examples of such VATable fringe benefits
would include company cars, assets given to employees
A: Where a registered VAT vendor (who is not a car
for a consideration below market value, free or
dealer or car hire business) acquires a motor car as
cheap services provided to employees and the right
defined in the VAT Act (essentially a passenger vehicle),
to use assets either free of charge or for a nominal
no input tax credit may be claimed on the acquisition
consideration.
amount. This rule applies to all means of acquisition,
including purchase, lease, instalment sale and car hire.
Neither the vendor’s intention on acquiring the motor car
Q: What are the new fringe benefit tax rules
or the actual use thereof are relevant – the VAT incurred
relating to employer provided phones and
on acquisition of a motor car (except by the car dealer or
computers at employees’ homes?
car hire business) is simply not claimable as an input tax
credit. A: With effect from 1 March 2008 (i.e. for the 2009
tax year), the right granted by an employer to its
employee to use a telephone or computer equipment
Q: I’ve heard that VAT needs to be paid on fringe at the employee’s home (mainly for the purpose of
benefits. Is this correct? the employer’s business), is no longer a taxable fringe
benefit. Any communication service provided to an
A: Where an employer grants fringe benefits to an
employee, such as access to the internet or e-mail, is
employee, a deemed supply for VAT purposes takes
also no longer a taxable fringe benefit as long as the
place. This means that the supply of the fringe benefit,
service is used mainly for the purpose of the employer’s
except in limited circumstances, is subject to VAT and
business.
VAT must be paid to SARS in the normal manner. The
value of the supply for VAT purposes is generally the

(overheard) ANDY
SAR
S
The 2009 tax filing season has
already kicked off. EMP501
PAYE reconciliations are due 30
May.

SARS HAS REALLY TURNED UP THE HEAT

ON LATE SUBMISSIONS.