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  • What will Trump your investments?

    What will Trump your investments?

    America is a massive global economy. Whilst we can all agree that whatever happens over there will certainly affect our economy and investment opportunities (local and offshore), you may have some questions as to how it affects us.

    Brian Kantor, chief economist and strategist with Investec Wealth, recently published his thoughts online on the BizNews website. The article presents some insightful graphs and specific trends that may not interest everyone, but certainly paint the scene in a way that allows us to see ‘real-time’ affect on our economy.

    As a short precursor it’s important to note that Trump’s post-election rallying, from an economic perspective, with all his promises of various reforms, led to a peak in the real bond yields in the US towards the end of December. Real rates have been very low recently as the world-wide demand for capital to invest in extra capacity shrunk away and as global savings rose. This essentially means that the Trump-inspired increase in real rates portended faster economic growth in the US and the extra demands for capital that can be expected to accompany faster growth.

    Still… the Trump administration will need to deliver on its promises to deregulate and lower taxes and also to bring jobs home.

    As Kantor notes: “These are prospects that have received particular favour from small business in the US, whose confidence levels have reached record highs, as well as from the customers of the leading banks that apparently are now willing to borrow more.

    It is this additional confidence of households and business that will influence their willingness to spend and borrow more. Balance sheets of US households have greatly strengthened in recent years, with more saved and more equity in their homes, while lower interest rates have reduced their interest expenses; similarly for business borrowers.”

    For our local trade and economy, it is interesting to note just how consistent has been the recent behaviour of the gold price in response to real interest rates. Real interest rates represent the opportunity cost of holding gold. The more expensive it is to own gold, the lower its price.

    Aside from a locally perceived inflation trends in the US, the Trump election raised inflation expectations in SA to over 7%. Very recently, however, as the Trump rally faded, inflation expected in SA over the next 10 years, as revealed in the RSA bond market, has receded sharply to below 6.5%.

    This must be regarded as helpful for the SA economy.

    The Reserve Bank has a highly exaggerated view of the influence of inflation expectations on inflation itself. This retreat in inflation expectations as well as a much improved outlook for inflation itself may encourage the Reserve Bank to reverse the course of short term interest rates – an essential requirement if growth in SA is to pick up momentum.

    In addition to this positive perspective is the evidence of a strengthening rand value against the dollar that comes with better inflation. The Rand, after initially weakening in response to the Trump election, has benefitted from a strong recovery of about 7% since November.

    As Kantor concludes his statements he says: “Clearly the extra growth and higher US interest rates associated with a Trump administration have neither raised long term rates in SA nor weakened the rand. Indeed the opposite has happened. This should encourage the Reserve Bank to focus on the downside risks to economic growth in SA rather than the upside risks to inflation. These surely have declined, both with the stronger rand and the prospects of lower food prices. The case for lower interest rates in SA has strengthened with the Trump election so that SA too can look forward to faster growth.”

  • Top tax tips for small businesses in South Africa

    Top tax tips for small businesses in South Africa

    January may begin with resolutions for the year ahead – but March begins with Tax Resolutions for the next tax year. We promise ourselves to be a little more organised, a little more prudent and try to minimise our contributions the next time around.

    BusinessTech recently said that with the many challenges small business owners face every day, being tax compliant is often not at the top of the list and tax deadlines often come and go in the struggle of trying to keep the business afloat.

    The single, sole proprietor often goes it alone, not realising that business tax returns are far more complicated than individual returns.

    Research conducted by TaxTim shows that 58% of small businesses do not get professional help when submitting their annual tax returns. In fact, only 13% handed the role over to an outsourced professional.

    Marc Sevitz, co-founder and CFO of the online tax return tool TaxTim, says that SMEs do not have one standard deadline for submission to SARS. SMEs must complete their annual tax returns within 12 months of the end of their financial year, which can be any time from January to December.

    If this is ringing a familiar bell with you, then here are some top tax tips!

    Use the correct rates for depreciation

    If your business owns assets that devalue over time, be sure to use the correct wear and tear rate from SARS’ list of different asset types. For example, computers depreciate at a different rate to vehicles. Also, check whether your business qualifies for the Small Business Corporation or Section 12C Manufacturing Assets special wear and tear allowance.

    Know all the allowed deductions

    There are numerous deductions and allowances available to SMEs. It is in your best interest to familiarise yourself with them to ensure you never pay more tax for your business than necessary. For example, a business can claim an allowance for a building that it owns, or special tax deductions for leased assets.

    Provide properly for provisions

    Remember that accounting provisions are treated differently for tax purposes. Ensure you reverse the Provision for Leave Pay and Provision for Employee Bonuses in your business’s tax calculation as these are only deductible for tax once they’ve been paid.

    Record every cent earned or spent

    Whilst it may sound like an administrative headache, keeping an accurate and up-to-date record of your business’s income and expenses, allocated to their various categories, is critical to ensuring a smooth tax return. The nature and size of your business will determine whether you’d want to look at investing in an accounting software or package, or if a basic spreadsheet record will suffice.

    Keep all your slips

    Keep all documents relating to income and expenses, such as invoices and receipts, and file them in a logical order. Should SARS request verification on your business’s tax return, you’ll easily be able to supply these. Scrambling around to find slips from the past year can easily be avoided.

    Make copies of documents

    It’s best to keep both a hard copy and electronic version of documents. Scanned copies can be stored online using cloud services like Google Drive or Dropbox, which ensures they’re safe, even if the originals get lost or if your computer is damaged or stolen.

    Store documents for five years

    Don’t toss away your documents once you’ve filed your business tax return. Legislation requires that SMEs keep all relevant documents for a minimum of five years. SARS may request a review of previous tax returns and you don’t want to be missing vital documents that impact your business’s tax liability.

    Small businesses play a crucial role in the strength of our economy and the future of our country. Let’s keep supporting SMEs where ever we can!

    <original article>

  • Budget 2017 – A quick precis

    Budget 2017 – A quick precis

    The Budget for 2017 has been presented to parliament and is awaiting final approval, but if all goes through as planned, here are some key issues that may affect your financial planning for the year – as well as your investment portfolio.

    Significant announcements

    • New 45% tax rate for those earning more than R1.5 million per annum. (Around 100 000 taxpayers are affected)
    • Dividend withholding tax increased from 15% to 20% (this will have an impact on your investments)
    • No increases in VAT or Capital Gains Tax (great news on no change to CGT)

    Tax changes

    • Government will raise an additional R28 billion during the new tax year
    • New 45% marginal tax rate for those earning more than R1.5 million per annum
    • Other taxpayers will not receive full relief from fiscal drag – the impact of inflation on tax brackets
    • Tax on dividends increase from 15% to 20%. (Tim let me show you how to get this down from 20% to ZERO)
    • Taxes on fuel to rise by 39c a litre. (Fuel levy +30c and RAF levy +9c)
    • Total fuel levy on petrol will amount to 36% of pump price
    • Total fuel levy on diesel will amount 40.2% of pump price
    • Properties sold for less than R900 000 will not pay transfer duties (2016: from R750 000)
    • Sugar tax: Will be implemented once parliament passes legislation
    • Carbon tax: Revised legislation will be published mid-2017 for public consultation

    Sin taxes

    • Duties on malt beer rises by 9% or 12c to R1,47 per 340ml can
    • Duty on unfortified wine rises by 8,8% or 30c to R3,61 per liter
    • Duty on fortified wine rises by 6,1% or 35c to R6,17 per liter
    • Duty on sparkling wine rises by 8,8% or 93c to R11,46 per liter
    • Duties on ciders and alcoholic fruit beverages rise by 9% or 12c to R1,47 per 340ml can
    • Duty on spirits rises by 8.5% or R4,43 to R56,50 per 750ml bottle
    • Duty on cigarettes rise by 8% or R1,06 to R14,30 a packet of 20s
    • Duty on cigars rise by 9,5% or R6,58 to R75,86 per 23g

    These are some significant announcements but are simply a snapshot of the whole presentation. If you want more information, visit The National Treasury website here.

  • Organize your life – Part 1

    Organize your life – Part 1

    Some people are amazingly good at bringing order to chaos and organizing their lives in such a way that makes the rest of us simply stand and gawk, thinking ‘How do they do it?’.

    Finding just the right amount of order in your life will not only help you minimise waste – but it will also help you reduce stress!

    When you can find what you’re looking for, quickly and easily, you will have more time to be creative and work on projects that will help you grow, but you also won’t need to go out and ‘buy another one’…

    There are so many great ideas on the web – but here are some of them from 100+ Ideas:

    USE ONLINE GROCERY SHOPPING

    Think about it: do some clicking in the comfort of your own home at night; select your delivery option – and it’s done. The groceries magically appear – you (and your family) don’t even have to get into your car.

    Most of the local online grocery options also enable you to order previously purchased products, keeping a list of your popular items – making it quicker and easier to top up your fridge and pantry each time you log on to your account.

    USE HANGING SHOE HOLDERS

    Whether it’s behind the bathroom door for extra toiletries and medicines, hanging inside the broom closet with your detergents or in the garage with tools, paints, chemicals and odds and ends – these simple, ridiculously cheap, organizers can be hidden away and hung almost anywhere discreet and give you considerably more shelf space – and allow you to see the full scope of what you have.

    You’ll never buy too much jik, or lose your spare razor blades again!

    USE A TASK SCHEDULER THAT IS DIFFERENT TO YOUR EMAILS

    This is a goodie for your work ethic!

    When you’re trying to be super productive at work, nothing is more disruptive than an email coming through that is asking you to ‘quickly’ do something. It breaks your creative work flow, slows you down and increases your stress levels.

    Many of us allow our emails, texts or phones to govern our task scheduling. We start off the day with one project in mind – and then if a message comes through, instead of prioritising and scheduling it for later, we deal with it now because we know that if we close that message… we might forget.

    Having a task programme that is separate to your emails, allows you to transfer requests, schedule them and stick to the job at hand. And you won’t miss a beat.

  • Warren Buffett’s Best Advice on Successful Investing

    Warren Buffett’s Best Advice on Successful Investing

    When you want to know how to invest like the wealthiest people on the planet… you need to listen to tips and tricks from the wealthiest people on the planet! That’s what our team at RFAdvice does, aside from partnering with discretionary investment managers (like Amity Wealth).

    Warren Buffet, currently the second wealthiest person in the world, has dedicated his life to refining, conditioning and focussing on investment opportunities that produce the highest returns.

    In this quick video, he speaks on principles of choosing investment opportunities. He obviously doesn’t say exactly who to invest with, but the principles are sound and should be applied to your tailored ‘strike zone’.

    Once you’ve watched this resource, you may want to contact us to add to, or begin, your investment journey.

  • A woman’s will

    A woman’s will

    Happy Women’s Day for tomorrow!

    In celebration of Women’s Month I wanted to share an article that focuses specifically on a financial planning aspect that is often overlooked for women. Recently, the Fiduciary Institute of Southern Africa (Fisa) discussed some important financial planning considerations for women that highlighted the need for an up-to-date will.

    It is estimated that at least half of the estates reported at the Master’s Office each year are of people who died intestate (without a will). This is largely due to the fact that South Africans often don’t see the need to draft a will, especially when they are relatively young or don’t have a significant asset base.

    It is important to note that men and women living together are not automatically treated as ‘married’ under the law in case of intestacy. Couples who live together without getting married often assume that the law treats them as married, this is not necessarily the case.

    The bottom line? You need your own will and have to understand the implications of your partner’s estate planning.

    Fisa often finds that where a woman does not have a lot of assets, or leads a busy life, proper estate planning is neglected. Where estate planning is done, it is important to not only consider current circumstances, but to plan for the future.

    The Intestate Succession Act applies to every South African who dies without a will and stipulates that the estate should be divided according to a specific formula. If the person was involved in a relationship other than marriage, the type of relationship will determine whether the partner will be allowed to inherit.

    In terms of the Act partners need to be regarded as a “spouse” in order to inherit in the case of intestacy, but the term is not defined in the Act. As a result, other legislation and court cases have to be consulted for an explanation.

    Historically, a marriage entered into in terms of the Marriage Act was the only recognised spousal relationship, but with the introduction of the Constitution, the legal system acknowledged that people in other types of relationships were entitled to protection.

    Williams says as a start, legislation was passed in the form of the Customary Law of Succession Act and parties to traditional marriages under black customary law are now regarded as spouses when dealing with an intestate estate.

    Court cases have also extended the definition of a spouse in this context to include monogamous Muslim and Hindu marriages and polygamous Muslim marriages.

    In terms of a Constitutional court ruling, same-sex partners are also regarded as spouses for purposes of intestate succession.

    The law allows parties to have a joint will, but Fisa usually advises against it. There have been isolated instances where the surviving spouse dies and the Master’s Office battles to trace the original will that also applies to the surviving spouse.

    It is crucial for partners in a relationship to ensure that they draft wills to protect one another.

    If you would like some advice on how to go about setting up your will, I’d be happy to advise you on this.

    * This content was sponsored by the Fiduciary Institute of Southern Africa.

    Source: moneyweb

  • The power of positivity and a good plan

    The power of positivity and a good plan

    Have you ever told yourself, “When I have more money, I’ll be happier”? How about, “I’ll never be able to pay off this debt”? These sort of toxic money thoughts are holding you back from financial success – and happiness! A good financial plan needs to be attainable and measurable, those expressions are neither.

    The first step to a financial plan is both the hardest and the easiest – it’s the starting point. The point where you measure how deep you are so that you can calculate what you need to do to get where you want to be. Measuring your budget is usually a huge relief for most people, your finances are no longer a mystical figure floating in the ether, you have defined an attainable and measurable goal.

    You need to rescript your brain into thinking positive and actionable thoughts. Here are some tips to help you along your way:

    Get good advice
    Getting good advice and being reminded that what we want to achieve IS attainable does wonders for an attitude of success. However, you will also need to keep your end-goal in mind.

    A good way to do this is to pick out a positive phrase that acts as a sort of rule-of-thumb. For example, “Is this [potential purchase] better than a family vacation / new car / bigger apartment?”

    Don’t Rush
    One study showed that the farther away a goal seems, and the less sure we are about when it will happen, the more likely we are to give up. Consistency is key.

    Use numbers and dates to measure WHEN you want to achieve your goals by. And work out some smaller, short-term goals along the way that will reap quicker results. Paying off debts or saving a certain amount, for example, can leave you with a great feeling of pride and accomplishment. This increases the likelihood of you keeping up your good financial habits.

    Dig in your heels
    Not next week. Not when you get a raise. Not next year. Get started today – and don’t let up!

    Need some good advice? That’s why I’m here. Let’s get in touch!

  • Cancer claims reveal risk trends

    Cancer claims reveal risk trends

    Recent statistics made available by Liberty Life reveal that cancer is the leading cause of claims paid by the assurer in 2015. One in four claims paid by Liberty were for cancer, and the proportion of claims for cancer is increasing, even at younger ages.

    Motor vehicle accidents are typically cited as the reason that young people need disability or income protection cover, but cancer was a greater cause accounting for 12.3% of claims (motor vehicles accounted for 11.9%). Even more worrying is the fact that in young parents, cancer was the cause for claim for 22.5%.

    These statistics are for claims on policies that provide cover for death, disability or dread disease (illnesses such as cancer, strokes and heart attacks). The fact that many people now survive cancer means that most of the claims were paid as a result of severe illness and not as a result of the life assured dying.

    Liberty’s claims-payments for severe illness cover increased by 50% from 2014 to 2015. This was not only due to the fact that more people are taking out this cover, but also because of the growth of awareness and early detection of cancer.

    Liberty was not alone in their findings. Sanlam’s claims-statistics for 2015 show that 60% of its dread-disease claims were for cancer. At Momentum, 34% of its dread-disease claims were for cancer. At Discovery they were 38%. And at Old Mutual, 57%

    An interesting statistic put out by Old Mutual with its claims figures is that 60% of all claims were for people under 45.

    You may ask yourself why, if you already have medical scheme cover and loss-of-income cover, do you also need severe illness cover for cancer?

    A medical scheme offers crucial cover that you shouldn’t be without. The problem is that cancer treatments are expensive and schemes have rules about what they do and do not pay for. Sometimes a doctor will recommend the best treatment available but a scheme only pays for a more modest treatment or there is a diagnosis of a rare form of cancer that requires specialised treatment.

    These statistics show that cancer is still a widespread affliction, even at younger ages. While cancer claims are obviously higher among older age groups, even 20- and 30- somethings should be prudent when it comes to taking out risk policies.

    If you have any questions or want to review your policies then give me a call and let’s meet up.

    Source: iol

  • What happens after a market downgrade?

    What happens after a market downgrade?

    There has been much murmuring in the financial field as of late regarding queries with respect to investing locally, or shifting all portfolios offshore, specifically in the light of the widespread media coverage and speculation regarding South Africa’s credit rating and the likelihood of a downgrade to “junk status” – which could happen as soon as the third quarter.

    While there is some speculation about when it might happen the general consensus seems to be that it is no longer a question of “if”, but “when”. It is thought that South Africa’s sovereign debt rating will be cut below investment grade in either June or December.

    Why is this happening and what does it mean?

    As I have been following, South Africa is facing a downgrade for two reasons:

    1. Slow growth – along with the rest of the world, SA faces lower levels of growth than forecast (and these forecasts continue to fall). There are a multitude of reasons for the slowdown including depressed commodity prices and reduced global demand for commodities, but also a lack of willingness to invest with all the current uncertainty around government policy.
    2. Fiscal outlook – effectively this relates to the ability of the country to control spending given the tax base so that excess spending does not need to be covered by issuing more debt. With low growth and high unemployment, tax revenue is under pressure and spending on benefits is rising. The government’s target to limit gross debt to 50% of GDP is going to be very difficult to achieve.

    Many experts have suggested that the immediate impact of a credit downgrade would be a flight of capital, a spike in bond yields, rapid currency depreciation and a fall in equity markets. However, looking at a historical analysis of emerging markets who suffered a similar downgrade returns a somewhat unexpected trend (based on a group of emerging markets that had all been downgraded from investment to sub-investment grade and their performance in the 12 months before and after the move).

    Markets are very good at anticipating what is going to happen, in the period preceding the downgrade they tend to perform poorly, but after the fact they gradually perform better – generally speaking.

    The trend is clearly that yields expand leading up to a downgrade, but generally recover afterwards. The average currency on a real effective exchange rate basis tells a similar story, increasing relative to where it was at the time of the downgrade.

    Countries that are downgraded to sub-investment grade go into recession, almost without exception. It takes years to earn back their credit rating. This is the real challenge that South Africa faces, the policy response will be critical.

    Investors should not be overly influenced by the short-term commotion, but rather set their sights further on their investment horizons. There is a tough road ahead, but it is a difficult year for local and international economies alike.

    I realize that this blog contains a large amount of technical terms and concepts – if you’re concerned about your investments or would like to discuss off-shore options – then let’s get in touch!

    Source: moneyweb

  • Investing in your fifties

    Investing in your fifties

    Many young people neglect to plan for their retirement during their early working lives, arguing that they will take care of it later in life when they are earning a bigger salary. However, on the flip side of the coin, as people get older they assume that they must rebalance their portfolios into more conservative investments.

    Luckily, most people are choosing to retire later in life.

    If you have left investing in your retirement until later in life, there may be a risk in investing too conservatively (not enough exposure to growth assets like shares and listed property) as your investments need to continue to outperform inflation in retirement. Alternatively, you may be tempted to invest in very risky investment schemes. It is really important to construct portfolios which have clearly set out objectives that will be able to meet the targeted return before and after retirement.

    How much income do you need per month? Will you need to buy a new car or fund a holiday? You need to know exactly what your retirement goals and dreams are. This will give you an accurate indication of how your assets have to be invested to cover these expenses. You need to be comfortable and knowledgeable about your retirement. You should know exactly how much money you can safely draw to enjoy your retirement without eroding your capital base.

    One of the most important things to try and achieve by the time you retire is to be free of debt. You don’t want to be in the position where you have to settle a mortgage or other debt with retirement capital.

    Just because you are retired it doesn’t mean you should stop working. Instead, you should re-focus your sights on a pursuit of happiness. People often still make money during retirement. With a lifetime of experience behind you it wouldn’t make sense to not stay busy. View this as the time you have been waiting for to do something you have always wanted to do, but felt like you never had the time to do. Who know, it may turn out to be a successful business venture.

    If you need some help working out a retirement plan or would like to revise your current plan give me a call and we can work something out.