Avoid tax year-end mistakes costing small businesses R20,000 to R50,000+. Logbooks, ETI claims, capital gains timing—what you must fix before 28 February.
If you run a small business, your real deadline is not “when SARS says” – it’s 28 February. Miss the key year‑end actions, and you can easily burn R20,000–R50,000 in avoidable tax, penalties or lost claims.
Below are the most common, expensive mistakes we see with South African small businesses at tax year‑end – and what you should fix before 28 February.
1. Not keeping a proper logbook for business vehicles
The mistake:
You (or your staff) use a vehicle for both business and private travel, but no SARS‑compliant logbook is kept.
Why it’s expensive:
- SARS disallows a big portion of travel deductions if you can’t prove business kilometres.
- If there’s a travel allowance or company vehicle, incorrect or no logbook = higher taxable fringe benefit and more PAYE.
- Once the year closes, you can’t “recreate” a credible logbook without risk.
What to fix before 28 February:
- Start (or update) a daily logbook:
- Date
- From/To
- Business purpose
- Opening and closing odometer readings
- Capture any missing periods while you still have diary, calendar and client records.
- Standardise: put a logbook template in place for every vehicle used in the business.
Tip: Use an app or spreadsheet now. Even three months of good records is better than none and can support reasonable estimates for earlier months.
2. Messed‑up Employment Tax Incentive (ETI) claims
The mistake:
Claiming ETI incorrectly or not claiming it at all for qualifying young employees.
Why it’s expensive:
- Under‑claim: you lose thousands in PAYE relief per qualifying employee.
- Over‑claim (very common):
- SARS can reverse ETI, add penalties and interest.
- Risk of verification and audits increases.
What to fix before 28 February:
- Check who actually qualifies:
- Age, remuneration level, employment date, and minimum wage requirements.
- Confirm employees are correctly coded on your payroll system.
- Reconcile ETI claimed YTD with your payroll reports and EMP201s.
- Correct errors in the February EMP201 if needed, or be ready with supporting schedules for verification.
Tip: If you’ve grown quickly or changed payroll software this year, your ETI data is at high risk of being wrong. Do a once‑off ETI review now, not during an audit.
3. Bad timing of capital gains (selling assets in the wrong tax year)
The mistake:
Selling property, shares, or major business assets without considering the tax year cut‑off.
Why it’s expensive:
- Capital Gains Tax (CGT) is triggered on the disposal date (often the date of sale agreement, not transfer).
- A large gain in a single year can:
- Push you into a higher tax bracket.
- Crush your cash flow when provisional tax is due.
What to fix before 28 February:
- Review any big disposals this year: property, shares, equipment, business sales.
- Confirm the effective disposal date – this determines which tax year the gain falls into.
- If you’re planning a sale:
- Get tax advice on whether to sign before or after 28 February.
- Consider spreading disposals over two tax years where possible.
Tip: A simple date shift from 27 Feb to 1 March can move a big CGT hit into the next year, giving you more planning time and cash‑flow breathing room.
4. Ignoring provisional tax top‑ups
The mistake:
Under‑estimating profit at first and second provisional tax and then doing nothing before year‑end.
Why it’s expensive:
- If your second provisional estimate is too low, SARS can levy underestimation penalties and interest.
- Many small businesses “guestimate” and pay the price later.
What to fix before 28 February:
- Do a proper management accounts review for the year to date:
- Turnover
- Expenses
- Once‑off income and gains
- Update your taxable income estimate and adjust your second provisional tax (due end February) accordingly.
- If needed, consider a voluntary “third top‑up” payment shortly after year‑end to limit interest.
Tip: Treat February like a mini year‑end. A 2–3 hour session with proper numbers can easily save more than R20,000 in penalties and interest.
5. Misclassifying owner drawings, loans, and dividends
The mistake:
Using the business bank account like a personal wallet and not correctly classifying:
- Director/owner drawings
- Loan repayments
- Dividends and shareholder loans
Why it’s expensive:
- SARS can treat some drawings as remuneration or dividends, triggering:
- PAYE under‑deductions
- Dividends tax
- Fringe benefit implications
- Poor records make it hard to defend your position in an audit.
What to fix before 28 February:
- Clean up your director/shareholder loan accounts:
- Agree balances to actual transactions.
- Identify anything that should be salary, bonus, or dividend.
- Decide how you’ll extract value (salary vs bonus vs dividend) and align your February payroll/dividend resolution with that.
- Ensure interest on shareholder loans (if applicable) is correctly calculated and posted.
Tip: Fixing this during the year is much easier than arguing about unexplained withdrawals a year later with SARS.
6. Poor record‑keeping and missing supporting documents
The mistake:
Relying on bank statements only, or losing invoices and contracts.
Why it’s expensive:
- SARS can disallow expenses without valid tax invoices or supporting documents.
- You may lose VAT input claims and income tax deductions.
What to fix before 28 February:
- Make sure you have proper records for:
- Major expenses and assets (equipment, vehicles, property, software)
- Rental agreements, finance leases, and contracts
- Professional fees, marketing, travel, and entertainment
- Scan and store documents securely (cloud or accounting system).
- Tie invoices to suppliers and accounts in your accounting system.
Tip: Start a simple “Year‑end SARS File” with all large and unusual items clearly documented. Your future self (and your accountant) will thank you.
7. Overlooking depreciation, wear‑and‑tear and small asset write‑offs
The mistake:
Not claiming full allowable wear‑and‑tear or accelerated allowances on assets, or misclassifying small tools/equipment.
Why it’s expensive:
- You pay more tax now than necessary because your taxable income is overstated.
- Some small assets could be written off in full in the year of purchase, but are incorrectly capitalised and spread out.
What to fix before 28 February:
- Review your fixed asset register:
- Are all assets recorded?
- Are disposals removed?
- Are the correct SARS wear‑and‑tear rates used?
- Identify small tools and equipment that may qualify for immediate deduction instead of long‑term depreciation.
- Make sure big asset purchases before 28 February are captured and documented.
Tip: A once‑off clean‑up of your asset register can deliver tax savings every year going forward.
8. Not aligning payroll, EMP201s, and financial statements
The mistake:
Treating payroll as separate from accounting and only “gluing it together” at year‑end.
Why it’s expensive:
- Mismatches between EMP201/EMP501 returns, payslips, and financials trigger SARS queries and audits.
- Under‑ or over‑declared PAYE, UIF or SDL can lead to penalties and interest.
What to fix before 28 February:
- Reconcile:
- Total salaries and wages in your accounts
- To monthly EMP201 submissions
- To annual EMP501 and IRP5s/IT3a certificates
- Fix any differences before finalising February payroll.
- Make sure fringe benefits (company car, medical aid, group risk, etc.) are correctly taxed and reported.
Tip: If you change payroll staff or systems during the year, you must do a reconciliation before 28 February.
9. Leaving professional help too late
The mistake:
Calling your accountant or tax practitioner only after SARS has already sent a query, or after the deadline.
Why it’s expensive:
- Limited planning options once the year is closed.
- Higher risk of rushed, error‑prone returns.
- More time and cost to fix avoidable problems.
What to fix before 28 February:
- Book a pre‑year‑end review with your accountant or tax practitioner.
- Take:
- Management accounts
- Asset register
- Payroll reports
- Details of any big once‑off transactions
- Ask explicitly: “Where can we still legally reduce tax or avoid penalties before 28 February?”
A simple year‑end checklist for small businesses
Before 28 February, work through:
- Vehicles: Logbooks updated and compliant.
- ETI: Qualifying employees checked and claims reconciled.
- Capital gains: Big disposals reviewed; dates confirmed.
- Provisional tax: Year‑to‑date numbers checked; estimates realistic.
- Owners: Drawings, loans, and dividends classified correctly.
- Records: Invoices, contracts and major expenses properly filed.
- Assets: Fixed asset register updated and allowances optimised.
- Payroll: Reconciled to EMP201/EMP501 and accounts.
- Advice: Pre‑year‑end meeting with a tax professional.
Even fixing two or three of these areas can be the difference between a smooth tax season and an expensive one.
