Comic contracts: A novel approach to contract clarity and accessibility

The content of this article was originally published on the Forbes website. The information and views set out in the article are those of the author(s)

Beware the fine print is the oft-repeated expression heard in almost any deal or contract negotiation. It’s good advice that too often is ignored in daily life and job situations—especially among those segments of the population that may not have excellent English language skills, or for that matter, anyone without experience with the often-impenetrable legalese featured in contracts.

Almost by definition, the “fine print” can signal complexity, confusion and gobbledygook that even the smartest people might find difficult to wade through.

Until now.

Robert de Rooy is an attorney based in South Africa and the founder of Comic Contracts – and this is no joke.

Comic Contracts are documents that are:

• Legally binding contracts in which parties are represented by characters

• The agreement is captured in pictures

• The parties sign the comic as the contract

“We produce illustrated contracts for people who are illiterate, people who are not literate in the language of the contract, employers with multi-cultural workplaces or companies that wish to transact with people who suffer from reading or intellectual disabilities. We want to enable people to be able to independently understand the contracts they are expected to sign.”

Those who are fans of contracts that have transparency, visibility, simplicity and clarity should take note.

De Rooy laid out the comic contract idea in a recent presentation at an International Association for Contract and Commercial Management (IACCM) Americas Conference. He says the comic contract was inspired by, and builds on, the work of preventative law and proactive contracting—a “movement in law that is being led by Professors Tom Barton (USA) and Helena Haapio (Finland), which promotes the use of visualization as a non-binding aid in understanding the text of an agreement, and thereby creates more ‘fit for purpose’ contracts designed for better relationships and better outcomes.”

Optimizing contract outcomes is the goal, no matter who the parties are, or their situation. Or, as de Rooy puts it: “We want contracts to be useful in aligning expectations and to signal healthy relationships towards successful outcomes. We don’t try to serve the interests of any party, we try to serve the relationships between them.”

Beyond Text-based Contracts: Examples Of Comic Contracts In Practice

Comic contracts step out of the “text”-based contract paradigm, de Rooy explains. Simply put, text on paper does not have to be the only way in which agreements can be reliably recorded.Pictures can are not only useful to aid understanding of the text in a contract, pictures can actually “be” the contract.

This takes contracting to a new and exciting level by making the contract document accessible to everyone. This offers a proactive and workable solution to the challenge faced by vulnerable or illiterate people when they are expected to sign, and be legally bound by, text agreements that they are not able to understand.

De Rooy explained the genesis of comic contract. He had been working on the idea for some years, and entered a description of the idea into a legal innovation competition in 2014, but it received no notice. A kind introduction by Kim Wright, an American lawyer and the American Bar Association’s Legal Rebel in 2009, to Professor Haapio, led to an invitation to present the idea at the Contract Simplification Conference in Switzerland in May 2016. “I could describe the idea, the theory of it and had some samples of illustrated clauses but I still did not have a complete field and signature ready agreement. This is where one of my practice’s clients stepped up to the plate. Indigo Fruit Farming gave me some budget to work with a Cape Town company called Jincom to produce a complete and professional quality Fruit-picker contract for their citrus farms.”

So, when he presented his idea, this time, he had something to show: “I did not have to try to describe the idea, the audience could see it, and they loved it. Moreover, I could tell them that this contract was actually going to be implemented.”

Initially, de Rooy was “worried that the workers would perceive the contract as patronizing, and the farm managers were concerned about doing things differently. So, it was agreed that their comic contract would first be presented to a group of workers they knew are unlikely to cause a problem if they did not like it for any reason. When this went well, it was then presented to a general group of new workers.”

After the contracts were signed, and the feedback came from the workers, “Indigo felt so proud that they wanted their consumer brand “Clemengold™” brand displayed on the contract.”

Robert has now partnered with Jincom to produce comic contracts for other companies who like this idea and want it for their people.

Apart from the Fruit-Picker agreement, other examples of comic contracts that have been or are being developed, include:

• A Generic Farm Laborer contract for the South African Wine and Agricultural Ethical Trading Association (WIETA), a multi-stakeholder, non-profit voluntary organization, which promotes ethical trade in the wine industry value chain. Stakeholders include producers, retailers, trade unions, non-governmental organizations and the government.

• Shop-floor Worker contract for a dairy business

• Kitchen Staff contract for a hotel group

• Codes of Conduct for sport clubs in Australia

• Domestic worker contracts

• Loan agreements

• Funeral Insurance contracts

• Rental contracts

We Are Defined By Our Ability To Understand Contracts

De Rooy observes that the law uses “a blunt instrument called age, and assumes that when you reached the age of 18, you can read and understand contracts. If you sign an agreement after age 17, it’s not binding without your parent’s signature. But when you sign it after age 18, it’s binding. “When one is well-educated, that’s reasonable, but if you are vulnerable, illiterate or simply faced with a contract that is not in your native language, you are factually in the same position as a small child, except that the law offers you no protection.”

Tim Cummins, IACCM CEO, provides insight into the use of comic contracts. “Our long-held perspective is that today’s contract design and structure is frequently a source of risk. Contracts contain important information that the typical user finds hard to understand, a belief confirmed by recent IACCM research where 88% of business people said that ‘contracts are difficult or impossible to understand’.

“We have supported new thinking in contract design for several years, introducing a design award in 2012. Therefore, we were delighted to discover the exciting innovation by Robert – a remarkable example of social responsibility, inclusive thinking and effective risk management that has led to better economic results for both employer and workers. We continue to encourage new thinking and we are delighted by the steady recognition in major corporations that this is a path they should follow.”

Cummins noted IACCM members were so impressed with the comic contract concept that de Rooy was selected to receive the “Program of Visionary Change Award” at the organization’s Americas conference last year. He noted IACCM members were so impressed with the comic contract concept that de Rooy was selected to receive the “Program of Visionary Change Award” at the organization’s Americas conference last year.

Using comics as the contract might sound condescending, especially with respect to illiterate people. That is not the intent; it’s reality that illiterate people should sign contracts they understand. The purpose is to fill a serious need and a void in the ‘art’ of contracting.

Simply put, every picture tells a story. And when pictures express contracts, it provides clarity that can vastly improve the story of many people’s lives.

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

Income tax: Deduction of medical expenses

Posted on 25 of January, 2018 by in Tax

An individual’s ability to pay tax may be adversely affected by costs incurred as a result of illness or disability. For this reason, a certain degree of relief is provided by the Income Tax Act No.59 of 1962 (the Act).

Timing of Deduction

Qualifying medical contributions and expenses may only be claimed in the tax year that they are paid. Expenses can be incurred during a tax year and not paid in the same year. The expenses should only be claimed in the tax year in which it is actually paid.

This guide provides general guidelines regarding the deductibility of medical expenses for income tax purposes. It does not delve into the precise technical and legal detail that is often associated with tax. This guide provides information obtained from our experience in dealing with SARS on a daily basis.

Persons for whom contributions and expenses may be claimed

Only qualifying expenditure paid by the taxpayer for the following persons may be considered in the determination of the medical allowance:

  • Yourself
  • Your spouse
  • Your children
  • Your dependents

Important: The patient may be any one of the persons listed above, but the payment must be made by the taxpayer, in order for the taxpayer to be able to claim the medical allowance.

Qualifying contributions to a medical aid

Any contributions paid by you for yourself, your spouse, your children and your dependents, to a medical scheme registered under section 24(1) of the MS Act.

Contributions paid by an employer of a taxpayer, which are included in the taxable income of the taxpayer as a taxable benefit, is deemed to be contributions paid by the taxpayer.

Qualifying medical expenses

Expenses that have been paid by you during the tax year to any duly registered –

  • Medical practitioner, dentist, optometrist, homeopath, naturopath, osteopath, herbalist, physiotherapist, chiropractor or orthopaedist for professional services rendered and medicines supplied;
  • Nursing home or hospital or any duly registered or enrolled nurse, midwife or nursing assistant for illness or confinement;
  • Pharmacists for medicines as prescribed by a person mentioned above.

will be taken into account when the medical allowance is determined, provided that the expenses have been incurred for yourself, your spouse, your children or any dependents.

The expenses may not be recovered from your medical scheme.

Documentary requirements to claim a medical allowance

The following documentation must be retained when a medical allowance is claimed for a tax year:

  • Proof of contributions paid to a medical scheme.
  • A statement from the medical scheme indicating the total amount of claims submitted to the fund that were not refunded to you or paid by the scheme to the service provider.
  • A detailed list of all amounts not submitted to the medical scheme or not recovered, with the following details:
  1. Date of payment
  2. Name of service provider
  3. Name of patient
  4. Relationship of patient to the taxpayer (if applicable)
  5. Amount
  • Invoices from service providers for amounts not submitted to the medical scheme or not recovered.
    The invoice should be issued to the taxpayer, but may indicate the patient as the taxpayer’s spouse, children or dependents.
  • Proof of payment to the service providers of amounts not submitted to the medical scheme or not recovered. Proof of payment may be a receipt issued to the taxpayer, paid cheques from an account of the taxpayer, bank statements in the name of the taxpayer, bank deposit slips of proof of electronic fund transfer from an account of the taxpayer.

In summary

  • Must be a qualifying medical expense,
  • Paid by the taxpayer,
  • During the tax year,
  • Supported by an invoice and proof of payment in the name of the taxpayer

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

Leef veilig – Neem verantwoordelikheid

Jy is verantwoordelik vir jou eie veiligheid. Jou ingesteldheid moet van só ’n aard wees dat jy nie ’n teiken van jouself maak nie. Maak ’n gewoonte daarvan om paraat te wees; wees te alle tye bewus van wat rondom jou aangaan, en waar moontlike gevare is. Alhoewel die polisie en sekuriteitsmaatskappye ’n rol speel in jou veiligheid, begin persoonlike veiligheid egter by JOU! 

Voorkom gevaar

Jou verantwoordelikheid vir veiligheid begin tuis; maak seker dat jy veilig leef in jou eie huis. Dit strek egter ook verder as dit; jy moet ook paraat wees as jy die huis verlaat. Maak veiligheid ’n leefstyl, en stel veiligheidsmaatreëls in om jou en jou familie te beskerm. 

Tuis

Is jy seker jou huis is veilig?

  • Sluit die veiligheidshekke. Dit sal nie noodwendig misdadigers keer nie, maar dit gee jou tyd om te reageer.
  • Kry addisionele sisteme in plek vir vroeë waarskuwings van inbrekers. Gooi gruis rondom jou huis en installeer beligting in die tuin, wat deur beweging geaktiveer word.
  • Skakel die alarmstelsel aan sodra almal rustig begin verkeer binne die huis. Inbrekers vat hulle kans wanneer ’n mens dit die minste verwag.
  • Probeer om roetine sovêr moontlik te vermy. Wanneer jou bewegings onvoorspelbaar is, is jy ’n moeiliker teiken.
  • Rapporteer enige verdagte persone wat in jou buurt rond beweeg. Wees bedag daarop dat misdadigers strategieë gebruik om hulle verkenning te doen; hulle sal byvoorbeeld voorgee dat hulle iets wil koop of verkoop.
  • Moet nooit inligting gee aan onbekende persone wat jou bel nie. Hoe meer iemand van jou weet, hoe meer is jy geneig om geteiken te word. Misdadigers kan byvoorbeeld voorgee dat hulle aan ’n sekere maatskappy behoort. Moenie vrae soos, “Wanneer is jou man tuis?” beantwoord nie.
  • Skep ’n veilige sone in die huis. Verkieslik by die slaapkamers, aangesien julle snags daar verkeer. Installeer ’n veiligheidshek in die gang, wat dien as ’n ekstra versperring waardeur gebreek moet word.  

Op die pad

Jy mag dalk veilig voel in jou motor, maar wat as jou motor gaan staan?

  • Stel jou familie in kennis van die roete wat jy sal volg en hoe laat hulle jou kan verwag by jou bestemming.
  • Vermy bekende gevaarlike gebiede sovêr moontlik.
  • Maak seker dat jy noodnommers op jou selfoon het indien jy dalk langs die pad staan met ’n onklaar voertuig. Maak seker jou selfoon is altyd gelaai.
  • Hou altyd ’n bottel pepersproei in jou handsak. 

Wees in beheer

Indien jy jouself bevind in ’n gevaarlike situasie, soos om met ’n geweer aangehou te word, is dit nodig om voorbereid te wees. Probeer jouself eers uit ’n situasie te praat. Gaan slegs oor tot selfverdediging indien jy seker is jy kan jou aanvaller oorweldig of as dit ’n saak van lewe en dood is. Teiken sagte plekke, enige alledaagse items binne bereik kan gebruik word:

  • Sleutels: Knyp dit tussen jou vingers vas en slaan of steek die misdadiger.
  • Pen: Steek die misdadiger met die skerp punt.
  • Deodorant: Spuit dit in die misdadiger se oë. 

Deur ’n veilige leefstyl te leef, sal jy nie jouself onnodig aan gevare blootstel nie. Kry versekering om jouself te beskerm; dit sal jou dek wanneer jy deur misdadigers oorval word. Die koste van jou veiligheid moet ook opgeweeg word teen die alternatief, naamlik trauma en lewensverlies. Trauma kan jou hele lewe ontwrig en daarom moet jy voorsorgmaatreëls in plek hê om jou en jou familie te beskerm.

Hierdie artikel is algemene inligtingsblad en moet nie as professionele advies beskou word nie. Geen verantwoordelikheid word aanvaar vir enige foute, verlies of skade wat ondervind word as gevolg  van die gebruik van enige inligting vervat in hierdie artikel nie. Kontak altyd finansiële raadgewer vir spesifieke en gedetailleerde advies. (E&OE)

Employment Tax Incentive: Why say no to R1280 per month per qualifying employee

Posted on 13 of October, 2017 by in Tax

What is it?

ETI is a tax incentive awarded to qualifying employers aimed at encouraging employers to employ employees between the ages of 18 to 29.

It is a temporary programme covering only the first two years of employment. The ETI commenced on 1 January 2014 and will end on 31 December 2019. It applies to qualifying employees employed on or after 1 October 2013 by eligible employers.

Saving on PAYE liability by employer

The amount of PAYE paid to SARS by the employer will be reduced by the amount of ETI utilized.

The ETI is a non-taxable incentive and thus has no income tax implication for the employer. The ETI will also be exempt from VAT.

The total saving per qualifying employee earning minimum wage is thus calculated as follows:

Minimum wage: R3001.13
ETI utilised: R1000.00
ETI tax exemption: R  280.00
Cost of employee: R1721.13

Can you afford not to source for qualifying employees!?

Who qualifies?

The employer is eligible to receive the ETI if the employer –

  • Is registered for employees’ tax (PAYE);
  • The employer is tax compliant in respect of all taxes.

An individual is a qualifying employee if he or she –

  • Has a valid South African ID;
  • Is 18 to 29 years old;
  • Is not a domestic worker;
  • Is not a “connected person” to the employer;
  • Was employed by the employer on or after 1 October 2013;
  • The employee does not earn less that the minimum wage of the industry or R2 000 per month where no minimum wage is prescribed and not more than R6 000 per month.

How is it calculated?

Calculating the ETI is a complex and technical calculation and has to be done in accordance with the Employment Tax Incentive Bill published in the Government Gazette.

The ETI amount for each employee is calculated according to the table below:

  ETI per month during the first ETI per month during the next
Monthly  12 months of employment of  12 months of employment of 
Remuneration the qualifying employee the qualifying employee
R0 – R2 000 50% of monthly remuneration 25% of monthly remuneration
R2 001 – R4 000 R 1 000 R 500
R4 001 – R6 000 Formula: Formula:
R1 000 – [0.5 x (monthly remuneration – R4 000)] R500 – [0.25 x (monthly remuneration – R4 000)]

 

There are a number of technical requirements to adhere to when calculating the ETI. This is not a comprehensive list but are a few of the more practical issues a payroll administrator has to deal with when calculating the ETI:

  • Each month it has to be determined if the employer is tax compliant and thus is a qualifying employer;
  • The payroll administrator has to determine whether the qualifying employees did not earn less than the basic minimum wage or R2 000 per month as applicable and not more than R6 000 per month. This is a complex calculation where the employee was not employed for the full month, or where over-time and other fringe benefits are included in the remuneration. The ETI calculated has to be apportioned in the manner prescribed by ETI Bill where the employee was not employed for a full month.
  • Each employee has to have a valid South African ID. The payroll administrator thus has to make sure that each employee is in possession of a valid South African ID.  In the rural areas not all employees are in possession of a valid South African ID.
  • Accurate record has to be kept of the period the employee is in the employment of the employer, since the ETI is only applicable to the first 24 months of employment.  This is particularly difficult in the agricultural sector where employees are employed on a seasonal basis. Only the months the employee is a qualifying employee will be used in determining the employee’s month of employment in order to determine the formula to be used according to the table above.
  • Accurate record has to be kept of the ETI the employer qualifies for, the amount utilized against the PAYE due to SARS and the amount rolled over to the following period.

How does the employer claim the ETI?

The ETI is deducted from the employer’s total PAYE liability for the month.  If the ETI exceeds the PAYE liability for the month, the excess may be carried forward to the next month.

The ETI unutilized at the end of each six-month easyfile reconciliation period, will be refunded to the employer if the employer is tax compliant.

Penalties and interest

An employer that receives the ETI for an ineligible employee must pay a penalty to SARS of 100% of the ETI received for that employee.

An employer who has wrongly claimed the ETI would not have been entitled to reduce the monthly employees’ tax payment.  That employer will have underpaid employees’ tax and must pay a percentage-based penalty plus interest levied by SARS.

It is thus of utmost importance that payroll administrators ensure that ETI is only claimed for qualifying employees and that the ETI amount is calculated correctly.

The ETI unutilized at the end of each six-month period will be accounted for by creating a debtor on the balance sheet of the employer and an ETI income on the income statement.  When the unutilized ETI is paid to the employer by the Government, the receipt will be allocated against the debtor on the balance sheet.

Payroll software

Due to the complexity of the ETI calculation, the comprehensive record keeping requirements etc it is recommended that employers use payroll software, for example VIP, for the calculations.

The advantages of VIP are extensive, for example:

  • Accurate calculation of ETI if the employer details are setup correctly by the payroll administrator;
  • Accurate recordkeeping;
  • Less time spent on payroll administration as well as on the six-monthly easyfile reconciliation capturing.

The ETI information has to be captured for each employee when preparing the qualifying employee’s IRP5.  This is a time consuming process and will result in unnecessary costs.

We can help you

Bdk Auditors has the necessary knowledge and expertise to help you maximise your ETI advantage.

We provide payroll services according to the needs and requirements of our clients.  These services include but are not limited to:

  • Monthly processing of payroll on VIP (this includes calculation of net salaries, employees taxes, ETI etc)
  • Preparing and submitting monthly EMP201 returns
  • Preparing of payslips to be distributed to employees
  • Bi-Annual easyfile processing and submission
  • Preparing of IRP5’s for employees
  • Dealing with SARS enquiries, reviews and audits

Please contact us should you wish to discuss your Employment Tax Incentive strategy or would like to receive more information on the payroll services provided by us

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

20 Years of bdk Auditors Fruit Benchmarking

Posted on 10 of August, 2017 by in Other

This year will mark the 20th annual bdk Auditors fruit benchmarking survey. Looking back while considering the latest trends we can summarise the past two decades as follows:

 

  • The biggest driver of profitability is still the production of quality fruit of the right variety
  • Over the past 8 years alone production has increased by more than 30%
  • Notwithstanding the higher production, the quality fruit on tree increased or at least stayed the same
  • There is a lot of value to unlock when you increase quality fruit on tree – BIG focus area
  • Best practice producers produce on average 16% more tonnes per ha. than average producers. This resulted in +-R40,000 extra profit per hectare, a fact that saw best practice producers being sustainable for most of the period while the average farmer was unable to replant for 9 of the 20 years

What is benchmarking?

 “It is an agricultural economic study which identifies the factors that contribute to farm gate profit while comparing participating farms with each other.”

The study identifies the relative performance of each participant against his peers. The study compares the performance of +-44 farms on a confidential basis. We then calculate benchmarks for best practice performance. Our study covers 37% (3,687ha) of apples in the Grabouw/Vyeboom area and 33% (873 ha) of pears in the same area. Focus is on apples, pears and to a lesser extent plums.

2017 will be the the 20th year that we are conducting our study and surveys have gone out. Participation is open for any deciduous fruit farm.

For more info or for participation please contact Tonie Linde tonie@bdkauditors.co.za or visit our website www.bdkauditors.co.za .

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

Smart Agriculture: 13 Trends To Watch Out For

Posted on 2 of August, 2017 by in Other

By  | June 14, 2017

In 2006, there were 6.6 billion people in the world. Cut to 2050, and this global population figure will move beyond the 9.5 billion mark. A United Nations FAO (Food and Agriculture Organization) report predicted that the overall volume of food production worldwide will have to increase by nearly 70% in 2050 – in comparison with 2006 – to keep up with (read: feed) the rapidly swelling global population. The need of the hour is to consistently increase agricultural productivity levels – and the importance of ‘smart agriculture‘ comes into focus here.

Before moving on to the latest data, stats and insights from the domain of smart agriculture, a couple of terms need to be explained. Firstly, the concept of ‘big data farming’ refers to the utilization of big data to make more informed farming decisions – that, in turn, bolster production and profit figures. On the other hand, ‘precision agriculture’ is the technique of closely monitoring the variability in crop yields (within single fields and across multiple fields), and tackling such changes effectively. Both of these concepts are vital for understanding the essence of smart, information technology-driven farming. Let us now turn our attentions on some important smart agriculture trends and statistics to look out for in 2017 and beyond:

  1. Size of the market

On a year-on-year basis, the global smart farming industry grew by nearly 6% in 2016, with it value going beyond the $10 billion mark. In the next ten years, the smart agriculture market is expected to witness a 4X growth (by the end of 2026, it will be a $40+ billion market). The hardware component of the industry will be at the forefront of this growth, with more than 50% share in the overall technological solutions for agriculture. The CAGR of smart agriculture for the 2016-2026 period has been estimated to hover around 11.5% – a mighty impressive stat in itself. The variable rate technology segment of smart agriculture will, in particular, grow rapidly.

  1. Key drivers of the market

As mentioned above, ‘enhanced agricultural productivity’ is the main reason for the steady growth in demand for smart farming. A closer analysis of the market reveals several other factors that are contributing to the need for using technology in agriculture. Greenhouse farming practices have gone up significantly in recent years, food demand levels (and shortages) have been increasing, there is a definite need for smarter livestock management, and irrigation management (i.e., preventing wastage of water) has emerged as a critical issue. Individual farmers as well as corporate farming entities are increasingly looking out for solutions that can help them in producing top-quality crops, while minimizing costs and making optimal use of available technological resources. As such, adoption of smart farming practices is increasing across the world.

Note: As the global population is escalating (and the demand for food is increasing), the percentage of workforce employed in the primary sector (agricultural labourers) is going down. In this scenario, smart farming is the best possible way to improve, and maintain, productivity levels.

  1. Growth of IoT in agriculture

Apart from productivity, ‘greater efficiency’ is the other main objective of smart agriculture. To attain these targets, IoT (internet of things) is quickly making its way in this sector. According to a recent BI Intelligence report, more than 75 million IoT devices will be installed (for agriculture) by the end of this decade – a rise of 150% from the 30 million figure in 2015. The average volume of big data generated and managed by individual farms will also show a staggering increase between 2017 (<0.5 million data points) and 2050 (>4.0 million data points). Consistent application of technology is resulting in more agricultural information being generated than ever before – and these insights are helping in bolstering productivity and efficiency.

Note: John Deere – a worldwide leader in agricultural machinery production – has already started to implement IoT sensors and other web-enabled tools in its tractors. Just like the fast-growing ‘connected cars’ market, ‘connected tractors’ are growing in popularity too.

  1. Components of smart farming

The broad concept of ‘smart farming’ is made up of several, equally important technologies. Mobile applications can now be used by farmers to remotely track and manage yields, costs and other important farm metrics, sensing technologies (on-field sensors) have proved mighty useful, both hardware tools and software solutions have increased in popularity, and smart positioning technologies (GPS) have done their bit towards making agricultural practices smarter. The importance of communication technology – via the cellular platform – cannot be overemphasized either. Telematics (i.e., the transmission of information over long ranges) has been a key component of smart farming as well, as have been the advanced data analytics tools and platforms. Each of these technologies are evolving every quarter – and smart farming as a whole is becoming more advanced, as a result.

  1. North America to remain the market leader

At the start of this year, North America – with a $5000 million smart agriculture market – was the clear worldwide leader in this sector. Between now and 2026, this market will grow at a CAGR of a shade under 10%, reaching $16 billion by the end of that year. In terms of actual pace of growth though, Asia Pacific markets (excluding Japan) will become the leader, with a CAGR of 13.7%. In Latin American countries, the CAGR of technology-aided agriculture will be more than 12% too. Europe, Middle East and Africa are also progressing rapidly in terms of growth in smart farming standards.

  1. Smart water management

A Beecham Research report found that close to 70% of the total fresh water supply in world is used up by the agricultural sector. That, in turn, underlines the importance of optimizing irrigation management with technology, and cutting down on wastage of water resources. According to OnFarm, smart farming helped in reducing the total amount of water required (for irrigation) in a farm by as much as 8%. Technology has helped in bringing down per-acre energy costs by nearly $6 as well. There have also been gains in terms of fertilizer cost reduction. On average, yields have increased by nearly 2% due to smart farming – and this figure is expected to grow in a big way in the next 8-10 years or so.

Note: In the United States, the average cereal-per-hectare yield is 7340 kgs. That is close to double of the global average figure (3850 kgs).

  1. Hardware components to lead smart farming 

Between 2017 and 2022, there will be a surge in the usage of hardware tools and devices for smart agriculture across the world. In particular, VRT (variable rate technology) tools and GPS receivers will fuel the growth in this segment, while smart steering and guidance systems will also have hefty demands from farmers. The purpose of using advanced hardware on farmlands is easy enough: minimization of inputs/resources, upgradation of quality, and maximization of output. According to experts from the field of technology, the constant betterment in the standard of automation and control systems is playing a vital role in the growth of smart farming.

  1. Rising investments

As interest in smart agriculture is growing and its benefits are becoming more and more apparent – investments in this sector are increasing too. In 2016, CropX (an American smart farming solution provider company) was invested upon by Lab IX and Robert Bosch Venture Capital GmbH. Many well-known OEMs of sensor devices are coming up with customized tracking tools and equipments – designed according to the precise nature, size and requirements of each farm. The collaboration between Trimble Navigation and Avidor High Tech France, Precision AG and Agrinetix (in November 2016) is an important example of the several high-profile partnerships that are being struck up between different companies involved in the overall smart agriculture value chain. Corporates are prepared to spend more on agricultural technology, knowing that the returns can be potentially big.

  1. Drones are taking flight

On ‘connected farms’, drones (or, Unmanned Aerial Vehicles) are gaining in importance as useful tools for crop data generation and general surveillance of cultivation lands. Over the last couple of years, quite a few agricultural solution provider companies have included drones in their services – a clear indication of the latter’s popularity and utility in smart farming. Since drones are not particularly expensive and are (generally) easily manageable, they are finding ready acceptance as a key component of IoT-enabled farming tools. Capturing images from fields is the primary function of drones in agriculture. Since these tools have boosted both the volume and the accuracy of farming data, decision-making has also become more informed than before.

  1. Understanding the smart agriculture ecosystems

Farmers and farm managers are, of course, the end-users of smart farming technologies. Technology providers are the ‘suppliers’ in this market – in charge of coming up with innovative software applications/mobile apps, M2M tools, sensors and tracking devices, communication channels, data analytics tools and other smart equipments for the users. OEMs like John Deere, who provide tractors and combines and sprayers are important stakeholders here, as are the ‘influencers’ (who have key decision-making authorities, including price-setting). With the advancement of technology, smart farming is becoming increasingly diversified – with players from different industries (retail, finance, chemicals, engineering etc.) joining the ecosystem in the last few quarters.

  1. Fish farming on the fast track of growth

The benefits of smart agriculture has expanded to different types of firms. While indoor horticultureoffers the best opportunities for precision agriculture, fish farming is another field that has started to show big benefits from the implementation of smart technology. Right from GPS tools to track the migration of fishes and selecting the best locations for fishing, tracking feeding patterns and detecting probable diseases – everything can now be done with the help of advanced tech devices/monitors/sensors. Information about the water quality can also be generated. Livestock management, farm vehicle management and dairy management are three other sectors that show high adoption rates of smart farming methods.

Note: Cotton, maize, soybeans and corn are some important crops that are being brought under the purview of smart farming in the United States. With greater use of technology and resultant productivity/supply improvements – it is expected that prices will remain under control in the long-run.

  1. Barriers to growth

For all its advantages, smart agriculture is still at a nascent stage – with penetration levels on the lower side at present. A recent Trimble report showed that basic data services are used in only 1 out of every 4 farms in the world. In the US, less than 40% of the maize and corn acres actually employ precision farming techniques. The cost-factor remains an important barrier (setting up the required infrastructure requires significant upfront investment by farm-owners). The general uncertaintiesabout data security in particular, and the impact of politics and weather elements on agriculture in general, are also important points of concern. Broadband and wifi network coverage in rural farm areas far from being uniformly strong, while there is still room for more specialized software solutions to come in. Confusions over the sensor standards, data ownership and cellular communication standards also lead to many farms staying away from initiating smart agricultural practices. Installations of IoT devices in farms also suffers from the problem of fragmentation. The good thing is, familiarity with IT tools and best practices is growing – and over time, most of these problems would hopefully be ironed out.

  1. Growing opportunities

The scope of IoT is expanding rapidly, and the onus is on the farm owners to understand, access, and implement this ‘intelligence’ in their day-to-day farming practices (e.g., tractors or irrigation systems). The partnership between Dacom and Orange Business Services have shown that there are considerable opportunities for leading mobile network operators to collaborate with agri equipment manufacturers. Similarly, M2M platform owners can get into mutually beneficial deals with manufacturers of sensor devices (given the importance of embedded SIMs in sensors that would be used in rural areas). Both the hardware and software segments of the market are set to become more refined in the foreseeable future. All of these will contribute to, at the end of the day, greater productivity, sustainability, reliability and optimized farming.

Earlier this year, the ‘Internet of Food and Farm 2020’ (IoF2020) was launched to speed up the implementation of IoT standards and practices in farming, and push up the overall adoption of smart agriculture in Europe. The four-year project (2017-2020) has users from the arable farming, meat production, vegetables, fruits and dairy farming sectors, and as many as 19 use cases in total.

Usage of technology in agriculture is not something entirely new. The first gas tractors and chemical fertilizers were used way back in the 19th century, and satellites were used for farming from the later half of the 20th century. GPS sensors were included in tractors by John Deere in 2001. Technology has come a long way since then – web-enabled tools and services are becoming more and more commonplace, and interest in IoT is at an all-time high. With traditional farming methods likely to fall woefully short of meeting the escalating food demands, farmers are increasingly turning towards smart agriculture. This is one domain that is likely to soar further in future.

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

Submit your 2017 Income Tax Return and avoid penalties

Posted on 28 of June, 2017 by in Tax

Annual Tax season is here, and Income Tax return submissions begin 1 July 2017. We’ve taken the liberty of answering frequently asked questions individuals may have. The South African Revenue Service (SARS) has allocated different submission deadlines dependant on the manner of the submission.

What are the submission deadlines for Income Tax Returns?

Please pay careful attention to the deadline applicable to you:

  • 22 September 2017 for manually submitted returns;
  • 24 November 2017 for returns submitted electronically at a SARS branch or via e-filling; or
  • 31 January 2018 for returns submitted by provisional taxpayers via e-filling.

Companies are exempt from the above-mentioned dates, as they are required to submit their returns within 12 month their financial year, via e-filing.

Who is required to submit, and who is exempt?

The threshold in respect of individuals required to submit a return is provided below:

  • Every individual who is a resident and had capital gains or losses that exceeded R40 000;
  • Individuals whose gross income exceeded
  1. R75 000 (if under 65 years),
  2. R116 150 (if older than 65 but under 75 years) or
  3. R129 850 (if older than 75)

A natural person, or a deceased’s estate is exempt from submission if their gross income consists solely of any one or more of the categories below;

  • Remuneration does not exceed R350 000 from a single source (including allowances);
  • They did not receive a car allowance or other income;
  • They received interest income from a source within South Africa that does not exceed:
  1. R23 800 (if you are younger than 65 years) or
  2. R34 500 (if you are 65 years and older);
  • They received dividends and were a non-resident during the 2017 year of assessment; and
  • received or accrued an amount from a tax-free investment.

What are the necessary supporting documents?

  • IRP5/IT3(a) certificate(s) from your employer or pension fund;
  • IT3(b) certificates for investment returns; such as interest and/or dividends
  • Financial statements (if applicable);
  • Medical aid contribution certificates and receipts for out-of-pocket medical expenses
  • ​Completed confirmation of diagnosis of disability form (ITR-DD) (if applicable)
  • Retirement fund certificates (pension, provident and retirement annuities);
  • Logbook and other documents in support of business travel expenses;
  • Bank account details; and
  • Any other relevant income and deduction information.

To curb penalties and interest related to late submission, we strongly recommend collating the respective documents in preparation for submission to SARS as soon as possible. Should you require assistance with your Income Tax return, please contact our offices.

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

Watch out for these cybercrimes

Posted on 20 of June, 2017 by in Other

We have all heard of phishing scams, online malware and the world of hacking. However, despite the fact that many people and companies have been unsuspectingly hit by online malware and have had data stolen, other scams often operate quietly and over a long period of time to steal more than just information. Here are some real-world scenarios of online scammers defrauding people of their money:

  1. Buying Online

Susan Parish shared her story on East Coast Radio regarding a scam she encountered. Her husband Russel had been doing some internet research into a buying French bulldog puppy. After exchanging many emails with the puppy owner, Chantel, who claimed to be based in the northern Cape, they agreed that he’d pay R2500 for the pup, via Pep voucher, and she’d fly the dog to Durban. Russel then left on a business trip, telling Susan to look out for an email from Chantel confirming the flight details. Instead she got an email from “EagleOne Courier”, saying they had the puppy, but the crate was not acceptable and the couple needed to pay R3000 for a temperature controlled one, R2950 of which would be refunded to them on its return. Susan paid that R3000, and then Chantel and her sidekick Robert disappeared.

  1. House Hunting

A couple who were buying their first home in Knysna had their R250,000 deposit stolen when a hacker scammed them into depositing the money into the wrong bank account. The scammer spoofed the e-mail address of the conveyancer and asked the buyer, Shandin Thompson, to deposit the money into their “trust account”. Not wanting to lose the deal on the home, Thompson and his wife arranged to pay the deposit a few days earlier than they had negotiated. Gmail didn’t flag the spoofed e-mails, and the banks didn’t flag the R250,000 transfer to the scammer’s account. The fact that the money had been paid into the wrong account wasn’t discovered for weeks.

  1. Cell phone Banking

A Durban businessman had more than R100 000 allegedly taken from his bank account when fraudsters were able to do a “SIM swop” on his SIM card in Johannesburg while he was at home in Glenwood. He claims fraudsters bypassed his online banking security features and accessed his account. The man, named Morris Smith, did not realise that someone pretending to be him had gone to a Vodacom store in Johannesburg, and was performing a SIM swop on his SIM card that enable a scam to access the funds in his online banking account. Later, Smith discovered that R107 480 had been stolen from his account, including R80 000 from his credit card account.

  1. Cloned Credit Card

A Knysna resident, Trent Read, had his bank card cloned by Sihle Dzingwa in Cape Town. Sihle’s intention was to make duplicate credit and debit cards using the information on Trent’s card. A cashier’s suspicions grew when the duplicated card that Sihle had attempted to purchase a laptop with had declined at a CNA in Brackenfell. Credit card cloning is done by illegally using a skimming device, which reads the information on the bank card strip, or by distractions at ATMs, where fraudsters are able to see your bank information during a withdrawal. 

  1. Intercepted Invoice

Amatola Water had contracted Malambo Construction to render services. But before the money could be paid out‚ Amatola Water received what looked like genuine correspondence from the service provider informing them of a change in banking details. Amatola Water then transferred an amount of R2.2 million into the newly provided bank account but were perplexed when representatives from Malambo Construction enquired about when their money would be paid. It was then discovered that someone fraudulently changed Malambo Construction’s banking details without their consent.

What to do if I am a victim?

  1. The first thing to do if you have been scammed through an online purchase is to report it to the classified site immediately. They will be able to collect information about the seller.
  2. Contact your bank’s fraud unit to lodge a claim, and if the transaction has not yet cleared, the funds will be frozen. Contact the scammers bank to retrieve the scammer’s particulars as linked to the account number.
  3. The first thing to do is to contact your service provider immediately. Measures will be taken to avoid further transactions with the use of your banking One-Time-Pin. Visit or contact your bank to notify them of the invalid transactions. Alternatively, you can change your Internet banking logon credentials online, and the changes will take effect within a few minutes. Call the Internet banking call centre to report the unauthorised sim swop.
  4. Contact your bank immediately to ensure that they cancel your card, and notify them of your cloned card incident.
  5. Once you have realised that you are a victim of invoice interception, contact both your bank and the receiving bank immediately notifying them of the transaction. Communicate with the original supplier, letting them know of the banking details you received on the intercepted invoice.
  6. In all instances where you have been a victim of cybercrime, report it at your nearest police station, and supply as much information as you can.

 Precautionary measures

  1. When making online purchases, ensure that the website is secured. The URL should have ‘https:’ and pay attention to the domain. The original may be .com, and the scammer may be staged as .co.za.
  2. When buying property, check the estate agent’s legitimacy by verifying their registration with the Estate Agents Affair Board (EAAB).
  3. Activate in-contact notifications linking your bank account to your cell phone number. Cell phone banking options allow you to check your balance frequently.
  4. Change your PIN often, and do not write it down on your card. If you must save it on your phone, disguise it in a phone number under a name you will remember. If your pin is 7532, an example of this would be: Harvey Spector – 082 333 7532.

If you receive new banking details from a usual supplier, contact the supplier to ensure that the changes are valid.

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

Interest free loans with companies

Posted on 17 of May, 2017 by in Tax

The latest annual nation budget presented in Parliament proposed the dividends tax rate to be increased with almost immediate effect from 15% to 20%. The increased rate brings into renewed focus what anti-avoidance measures exist in the Income Tax Act[1] that seeks to ensure that the dividends tax is not avoided.

Most commonly, the dividends tax is levied on dividends paid by a company to individuals or trusts that are shareholders of that company. To the extent that the shareholder is a South African tax resident company, no dividends tax is levied on payments to such shareholders.[2] In other words, non-corporate shareholders (such as trusts or individuals) may want to structure their affairs in such a manner so as to avoid the dividends tax being levied, yet still have access to the cash and profit reserves contained in the company for their own use.

Getting access to these funds by way of a dividend declaration will give rise to such dividends being taxed (now) at 20%. An alternative scenario would be for the shareholder to rather borrow the cash from the company on interest free loan account.  No interest accrues to the company on the loan account created (and which would have been taxable in the company) and the shareholder is able to access the cash of the company commercially. Moreover, since the shareholder is in a controlling position in relation to the company, it can ensure that the company will in future never call upon the loan to be repaid.

Treasury has for long been aware of the use of interest free loans to shareholders (or “connected persons”)[3] as a means first to avoid the erstwhile STC, and now the dividends tax. There exists anti-avoidance legislation; in place exactly to ensure that shareholders do not extract a company’s resources in the guise of something else (such as an interest free loan account) without incurring some tax cost as a result.

Section 64E(4) of the Income Tax Act provides that any loan provided by a company to a non-company tax resident that is:

  1. a connected person in relation to that company; or
  2. a connected person of the above person

“… will be deemed to have paid a dividend if that debt arises by virtue of any share held in that company by a person contemplated in subparagraph (i).” (own emphasis)

The amount of such a deemed dividend (that will be subject to dividends tax) is considered to be effectively equal to the amount of interest that would have been charged at prime less 2.5%, less so much of interest that has been actually charged on the loan account.

By taxing the interest component not charged, the very real possibility exists for the deemed dividend to arise annually, and for as long as the loan remains in place on an interest free basis.

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

[1] 58 of 1962

Interest free loans to directors

Posted on 24 of April, 2017 by in Tax

It is very often the case that a company extends an interest free or low interest loan to a director. This manifests either as a true incentive or benefit to that director (mostly the case in larger corporate environments) or in a small business environment in lieu of salaries paid. The latter is especially the case for example where a spouse or family trust would hold the shares in the company running the family business, but which business is conducted through the efforts of the individual to whom a loan is granted from time to time.

In terms of the Seventh Schedule to the Income Tax Act[1] a director of a company is also considered an “employee”.[2] This is significant, since directors can therefore also be bound by the fringe benefit tax regime applicable to employees generally.

Paragraph (i) of the definition of “gross income” in the Income Tax Act[3] specifically includes as an amount subject to income tax “the cash equivalent, as determined under the provisions of the Seventh Schedule, of the value during the year of assessment of any benefit … granted in respect of employment or to the holder of any office…”

Clearly, benefits received by a director of a company would therefore rank for taxation in terms of this provision. The question remains therefore whether loans provided to such directors by the companies where they serve in this capacity would amount to such a taxable benefit, and further how such benefit should be quantified.

Paragraph 2(f) of the Seventh Schedule is unequivocal in its approach that a taxable fringe benefit exists where “… a debt … has been incurred by the employee [read director], whether in favour of the employer or in favour of any other person by arrangement with the employer or any associated institution in relation to the employer, and either-

(i)            no interest is payable by the employee in respect of such debt; or

(ii)           interest is payable by the employee in respect thereof at a rate of lower than the official rate of interest…”

Paragraph 11 in turn seeks to quantify the amount of the taxable fringe benefit to be included in the gross income of the director. Essentially, the taxable fringe benefit would be equal to so much of interest that would have been payable on the loan at the prime interest rate less 2.5%, less any interest actually paid on the loan. The benefit therefore does not only arise on interest-free loans, but also on loans carrying interest at less than the prescribed interest rate.

It is necessary to note that a fringe benefit otherwise arising will not be a taxable benefit if the loan amount is less than R3,000, or if it is provided to the director to further his/her studies.

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)