*This content is brought to you by Futureneers Capital
“You’ve got it!” says Jaco Gerber, CFO of Futureneers Capital, a registered Section 12J Venture Capital Company with more than R300m capital under management. Futureneers has partnered with the KSE Solar fund to offer its investors a very unique structured 5-year payment plan to claim a Section 12J tax benefit of 5 times their upfront cash invested. In addition, the investment is underpinned by exciting solar projects.
Jaco continues, “as a business it’s essential to remain to be forward thinking. We therefore enable our investors to get a 100% tax deduction today based on their ability to generate cash flows in the future, whether it’s by way of employment or running a business. In this way the investor can maximise their Section 12J benefits before this amazing tax incentive comes to and end at the end of June”.
The Futureneers KSE Solar 5-year payment plan was specifically designed with an investor in mind that would have continued to invest in Section 12J every year for the next 5 years if the program did not come to an end, or, an investor wishing to increase and “max-out” their Section 12J tax benefits up to R2.5m for individuals and trusts and up to R5m for companies even while they will only to pay for such amounts from future income.
Let’s look at a simple example of how it works:
- Mr A has a taxable Income of R1m and wishes to make a 12J investment to reduce his tax liability. Mr A however only has R200,000 free cash flow. Normally his section 12J investment will be limited to R200,000.
- However, Mr A is employed and generates R200,000 free cash flow every year. The Futureneers 12J KSE Solar 5 Year Payment Plan now provides Mr A an opportunity to get a Section 12J tax deduction of R1m, even while putting only R200,000 down before the end of June – that’s a tax benefit of 5 times cash invested.
- Mr A can now claim the full R1m against his taxable income, and assuming a maximum tax rate of 45% can receive a tax benefit of up to R450,000.
- The rest of the investment is payable in 4 annual payments of R200,000 spread over the next 5 years. Taken into account that Mr A just received back R450,000 from SARS, amazingly, the payments for the next 2.25 years are already covered by the SARS Section 12J incentive.
- The transaction is structured as a loan carrying a below prime interest rate over the full 5 years. No monthly payments are due and the steady dividend stream from the solar projects pays all the interest.
- Depending on when the investor utilizes their section 12J tax benefit, the project generates returns between 24%-33% per year, measured on an IRR (internal rate of return) basis over 5 years.
It is also worthwhile to note that the 5 Year Payment Plan is available to individuals, trusts and companies. Although the investment offerings start at only R200,000 per year, individuals and trusts can now maximize their Section 12J benefits up to R2.5m, paying only R500,000 per year for 5 years, while Companies get a maximum section 12J tax benefit of R5m paying only R1m a year.
To learn more, click here.Â
