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Starting A Small Business In Australia: A Surprising Perspective On SARS

by on 19/08/13 at 10:22 am
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I’m currently expanding Blink Tower, an award winning animation company, to Australia.

One of the things that has often threatened our cash flows in South Africa is VAT. We’d make a sale of a few hundred thousand Rand, invoice the client, and immediately be liable to pay VAT on the transaction. Even though we might only get paid 90 days later!

There are workarounds to this, such as invoicing on delivery, rather than on the initial sale, but it adds complexity to bookkeeping & reporting that should be unnecessary.

I asked an accountant friend of mine in Australia what some best practices would be. Imagine my surprize when she said that in Australia, GST is paid on a CASH basis and not on the accrual accounts of the business. This is true for any business that has revenues of less than $2 Million per annum (about 19 million Rand). The argument being that if your business earns more than $2 Million pa, you should be able to pay GST without it hurting your cashflows.

This obviously makes sense! And although many things in South Africa (and Australia for that matter) really don’t make sense, I figured that SARS is a pretty efficient, modern institution and that similar exemptions should exist.

After all, hasn’t the South African government been beating the drum about the importance of entrepreneurship and small business to the South African economy?

So I dusted off the SARS VAT Guide for Vendors (over here) and discovered that yes, indeed, it IS possible to submit VAT returns.

But alas, there are a couple of caveats:

1. You have to apply to the Commissioner for “special” permission
2. Companies can’t do it. Only natural persons, partnerships, public authorities and some types of NGOs qualify.
3. You must have revenues of less than R2,500,000 pa.

Alas, it looks like small businesses are at a distinct disadvantage yet again. Meanwhile, in Australia, 50% of the nation’s GDP is generated by the small & medium enterprises. The per capita GDP is $61,000 (vs $8,000 in South Africa).

Building a thriving economy on small & medium businesses is no easy task and will take time, effort & initiative.

But there is no excuse for keeping in place barriers such as red tape and thoughtless tax rules and I call on SARS to immediately allow all businesses earning <R20MM per annum to submit VAT returns on a Cash/Payments Basis.

[Tax image courtesy of Shutterstock]

Henk Kleynhans is a technotarian. He has built Wi-Fi networks in Africa with Skyrove, lobbied governments on spectrum reform, raised money from Google to build TV White Space networks and once helped smuggle the Dalai Lama into South Africa. Henk is the CMO at, an award-winning Explainer Video company. View more articles by Henk Kleynhans.

Tags: australia, Economy, sars, small business, tax, VAT

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