Tax/UIF Question

blunomore

blunomore

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I am taking a salary from our business. I am registered as an employee, and we pay PAYE and UIF on my salary.

Would it be more beneficial for me to get a "household allowance" instead of a salary and therefore not pay income tax, but then also not be entitled to claim UIF and rather invest some of that money elsewhere for a "rainy day"?

Any advice?
 
Not exactly sure what you mean by "household allowance" but the quick answer would be no as such a payment would not be deductible against the business income.
 
mikef said:
Not exactly sure what you mean by "household allowance" but the quick answer would be no as such a payment would not be deductible against the business income.
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Allowance a man would e.g. give his wife to run the house - groceries, etc.
 
Its gonna have to be classified as a business expense, and will need receipts of such expenses. Wont pass any audit, thats for sure!
 
IRG said:
Its gonna have to be classified as a business expense, and will need receipts of such expenses. Wont pass any audit, thats for sure!
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I am curious: if it concerns his household , how does it get classed a business expense?
 
tricky, got to hide it as office expenses ... but, i dont think u'll get away with it! gonna set off alarm bells. Just face it, you got to pay tax, just like the rest of us schmucks !!
 
IRG said:
tricky, got to hide it as office expenses ... but, i dont think u'll get away with it! gonna set off alarm bells. Just face it, you got to pay tax, just like the rest of us schmucks !!
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I refuse!!!!

Ah, who am I fooling? We offer it up so easily.
 
somebody got to pay for that R74mil pres. inaugeration !!

more of us who pay ... the easier it is to spread ! :rolleyes:
 
If you do that it would need to go to a loan account which you would owe back to the business. Any loans owed by members to the business would raise eyebrows at SARS, and also if they looked into it, having "no income" would raise questions into what you are living on

The best thing you can do is structure your salary to keep tax as low as possible
 
Smurfatefrog said:
If you do that it would need to go to a loan account which you would owe back to the business. Any loans owed by members to the business would raise eyebrows at SARS, and also if they looked into it, having "no income" would raise questions into what you are living on

The best thing you can do is structure your salary to keep tax as low as possible
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I am not sure posters understood my Q. Maybe I was unclear:

If I do not take a salary, I pay no taxes. If I get paid a "household allowance", it is a deductable expense to Mr Blu IF HE CHOOSES TO PROVE IT WITH RECEIPTS, ETC. If not, it just increases his tax liability.

Is that more or less correct?
 
its only a deductable expense if it was expended in the process of earning an income. and living expenses dont count
 
thatdamnJoe said:
its only a deductable expense if it was expended in the process of earning an income. and living expenses dont count
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My Q is not so much if he can deduct the allowance, but if it would benefit me to NOT take a salary (which becomes taxable in my hands) but rather call it a household allowance and then use some of the money to take out some annuity/investment/thingamajing that would take the place of any UIF benefit I would have gotten.
 
it'll be taxed somewhere. Either in your hands as a salary, or in the business hands as a profit since it cannot legitimately be deducted as a business expense.

I'm not sure how the company's funds end up in your hands for you to take out "some annuity/investment/thingamajing"? Or does the company itself take it out(in which case it again does not count as a business expense and cannot be deducted from the business' tax responsibilities and you need to delcare it as a fringe benefit for which you are taxed)
 
I dont think you get "household" allowances. Its gonna have to be sum sort of running costs thing for the business side. As for you gettin money ... well the tax man is gonna wanna know how you keep getting money into your bank account if you are "unemployed" and no longer declaring any taxable income! Remember that with FICA, they can query into any bank account without your permission.
 
blunomore said:
As a household allowance.
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OK, you must understand that the company and you are two different tax entitities.

The company has an income tax responsibility which is calculated on the amount of profit it makes. If it deducts a "household allowance" from it's books in order to decreas the amount of profit it earns and thereby decrease it's tax liability, that would be a fraudulent transaction since its hardly a business related expense. A salary on the other hand would be deductable...

Now on to your own personal tax responsibility. If you receive an income(doesnt matter whether its called a salary, household allowance, payment for services rendered, whatever) or even a donation above a certain amount, it is taxed in your hands. Since you specify that you take out the investment with the money in your hands, the money has moved from the company to you and thus you have either earned it, lent it, or it was donated to you. All three have different tax implications
 
IRG said:
I dont think you get "household" allowances. Its gonna have to be sum sort of running costs thing for the business side. As for you gettin money ... well the tax man is gonna wanna know how you keep getting money into your bank account if you are "unemployed" and no longer declaring any taxable income! Remember that with FICA, they can query into any bank account without your permission.
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I understand, but surely if a person so chooses, he can give someone a monthly 'allowance' for whatever reason? If a man gives his wife money every month, does this get considered a salary? I am not so sure.
 
thatdamnJoe said:
Now on to your own personal tax responsibility. If you receive an income(doesnt matter whether its called a salary, household allowance, payment for services rendered, whatever) or even a donation above a certain amount, it is taxed in your hands. Since you specify that you take out the investment with the money in your hands, the money has moved from the company to you and thus you have either earned it, lent it, or it was donated to you. All three have different tax implications
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Are you saying that if person A gives person B Rx every month just for the hell of, and he gets nothing in return, person B is liable for taxes on it?
 
blunomore said:
I understand, but surely if a person so chooses, he can give someone a monthly 'allowance' for whatever reason? If a man gives his wife money every month, does this get considered a salary? I am not so sure.
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a salary, donation or loan
 
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