It is often said that two things in life are unavoidable, death and taxation. Since we cannot elude either, the more pertinent question becomes: how do we adequately prepare for them?
A tax expert Thabiso Nxumalo from Luz Solutions says if Mphil. Tax, CFIP, RA(SD) you are operating a business or earning an income in any formal or informal capacity, it is important to recognise that evading tax is both unsustainable and legally perilous.
"Rather than avoid the inevitable, we must turn our attention to what is required to stay in good standing with the tax authorities," he suggests.
To do that Nxumalo who holds Mphil.Tax, CFIP and RA(SD) takes us through the challenges businesses face and how they can overcome them;
Ensuring tax compliance
Compliance challenge:
Many businesses fall into non-compliance simply because of poor record-keeping. Invoices get misplaced, certain transactions go undocumented, and operational expenses are not properly tracked. These gaps make it difficult to file accurate tax returns or survive an audit leaving businesses vulnerable to penalties that could easily push them into insolvency.
A business that lacks a solid record-keeping framework is at a disadvantage from the outset. Whether or not you’re being audited, compliance starts with reliable documentation.
For Example:
A company that attempts to deduct large expenses, but cannot produce supporting proof, may see those deductions disallowed during an audit leading to a large and unexpected tax bill.
What you can do:
- Use digital accounting tools to automatically track and store financial records.
- Maintain a parallel physical filing system for redundancy and verification.
- Periodically review your records and request any missing documents before deadlines or audits arise.
Don’t DIY—Partner with tax professional
There’s wisdom in the saying: “Cheap is expensive.” Nowhere is this more evident than in tax management. Taxation is a highly specialised area. Entrusting your tax matters to someone who isn’t properly qualified or attempting to do it yourself can result in costly mistakes.
Not all accountants are tax experts. While Chartered Accountants are well-versed in financial reporting, taxation requires a separate and dedicated skillset. Businesses that rely on generalists for tax planning and filings often find themselves paying more in penalties than they would have for proper advice.
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