Small Business Focus

How to pay less tax by writing off 100% of an investment in a small business

You can only invest in businesses with an asset value of less than R50 million.

Pavlo Phitidis, Aurik Business Accelerator

There are seven things you need to look out for [when considering investing in a Section 12J business]…

Pavlo Phitidis, Aurik Business Accelerator

Section 12J of the Income Tax Act allows investors to write off 100% of their investment in a registered company from their taxable income.

Towards the end of 2017 there were more than 60 registered Section 12J companies.

There is no cap on how much an investor may invest in a registered Section 12J company.

As long as the investor holds the shares for five years, the initial tax benefit will not be recovered by Sars.

The Money Show’s Bruce Whitfield interviewed Aurik Business Accelerator’s Pavlo Phitidis to discuss Section12j for his weekly small business feature.

Phitidis touched on why and how Section12j was created, as well as the ins and outs of investing into small businesses.

He gave advice on investing in a way that manages risk and return.

Listen to the interview in the audio below (and/or scroll down for more quotes from it).

Debt in a small business isn’t useful...

Pavlo Phitidis, Aurik Business Accelerator

Do you believe in the business? Do you believe there’s a good future for them? Make sure you have some sort of affinity for it.

Pavlo Phitidis, Aurik Business Accelerator

The most difficult thing… is how are you going to exit the small business?

Pavlo Phitidis, Aurik Business Accelerator

Look at the underlying asset class. And look at the fund manager…

Pavlo Phitidis, Aurik Business Accelerator

It’s really hard to liquidate your investment in an SME.

Pavlo Phitidis, Aurik Business Accelerator

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