Tax planning for February 2025: optimising expenditure

As the end of the financial year approaches for companies with a February 2025 year-end, it is crucial to plan strategically to minimise taxable profits. One effective way to achieve this is by reviewing and incurring qualifying expenses before the year closes. Proper tax planning can help reduce the company’s tax liability and ensure compliance with South African tax regulations.  

What expenses should companies consider?

To lower taxable profits, companies should focus on legitimate business expenses that can be incurred in February 2025. Examples include:

  1. Prepaid Expenses
    • Software Subscriptions: Paying for annual or multi-year software licenses or subscriptions in advance can reduce profits for the current tax year.
    • Insurance Premiums: Settling insurance costs early may qualify as a deductible expense.
  2. Travel and Accommodation
    • Flights and Accommodation: Booking business-related travel for the upcoming months can be expensed in February, provided the travel relates to the business’s operations.
  3. Repairs and Maintenance
    • Addressing necessary repairs or maintenance for equipment, property, or vehicles before the year-end can qualify as a deductible expense.
  4. Office Supplies and Equipment
    • Stationery and Consumables: Purchasing supplies in bulk to cover future needs.
    • Equipment: Acquiring small tools or equipment that qualify as immediate write-offs under tax regulations.
  5. Marketing and Advertising
    • Campaigns: Prepaying for advertising campaigns or marketing materials planned for the next financial year.

Key considerations for tax planning

  1. Expense Documentation
    • Ensure all expenses are properly documented with invoices and receipts to substantiate deductions during tax filing.
  2. Capital vs. Revenue Expenditure
    • Only revenue expenses, such as day-to-day operating costs, are immediately deductible. Capital expenses, such as purchasing machinery, may need to be depreciated over time.
  3. Budgetary Constraints
    • Avoid overspending solely for tax benefits. Expenditure should align with the company’s financial strategy and cash flow capabilities.

By incurring deductible expenses before the year-end, companies can:

  • Reduce taxable profits and, consequently, tax liability.
  • Maximise available tax deductions while staying compliant with SARS regulations.
  • Improve financial planning for the next fiscal year.

For companies with a February 2025 year-end, February is the final opportunity to optimise tax planning through strategic expenditure. By planning ahead and making informed financial decisions, businesses can significantly lower their tax burden while maintaining financial health.  

Consulting a tax professional to ensure compliance and alignment with your company’s financial goals is highly recommended.

[Author:  Michael Rushby]

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