Reptile Breeding 'Business'

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Reptile Breeding 'Business'

Postby ewertb » Mon Jul 14, 2014 9:55 am

As the bug (or rather snake) has bitten, and I want to get into it a bit more seriously I have some questions/concerns regarding casual breeding of reptiles. Casual in that doing it as a hobby trying to produce and experiment with getting some new morph, etc. and not as a business where your living depends on it.

The concern is that through this you end up with lots of babies, and, depending on what your 'breeding project' is, some very expensive and valuable ones that you will likely need new homes for, i.e. end up selling. This entails receiving additional income from your hobby... Does this then get seen by SARS as a 'business' where you need to be registered with some governing body with a business name and required to pay tax, etc.?
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Re: Reptile Breeding 'Business'

Postby rolandslf » Mon Jul 14, 2014 10:23 am

It is not a business, you will very seldom find that the majority of us make any profit out of the hobby.
We all do sell off our unwanted babies, and hardly ever get what they are worth.
For instance, if you have raised a pair of Corn Snakes from hatchling to breeding age, it will have taken you three years of feeding, cleaning, buying enclosures.
This would have set you back in the region conservatively of around R3000. Let us say for the exercise that they are a pair of Amels, and the female lays 18 eggs.
You can reasonably at todays pricing expect to sell the hatchlings at R100 each, so you make a total of R1800, if you manage to get them all sold, and do not keep any back for yourself. You are still running at a loss. In the following year you add another conservative R1000 in expenditure for this original pair. You are still technically out of pocket the amount of R2200. And so the circle keeps on turning.

I would advise anyone to think carefully before attempting to making a full blown business out of the hobby.
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Re: Reptile Breeding 'Business'

Postby sgmpanza5 » Mon Jul 14, 2014 10:30 am

Hi Ewertb,

I can only give advice on the business side of things.

You have at least two choices. Firstly, you can receive income from your reptile hobby in your personal capacity. You can then either choose to disclose this income to SARS (recommended) but you would pay a higher tax, percentage wise, especially if you are also receiving income from another source i.e salary. If you're not receiving any other income then your income from your reptile hobby of up to +/- R60000 (this amount changes from year to year) would be tax free. Or you could choose to not disclose your income to SARS but I would not recommend that because if you were caught your tax calculations would be back-dated to when you should've started paying tax and there would be penalties and interest.

Secondly, you could register a private company. I would recommend this path. With a private company you can claim expenses such as reptile food (mice/rats), maintenance (utilities, bedding, cages etc), travel (maybe when you're going to expo's). These expenses can be claimed as a reduction of your tax expense. Plus the first +-/ R70000 (this amount changes every year) of your profits would be tax free. Registering a business is not as cumbersome as most people think it is as long as you have a knowledgeable advisor. If you need help with registering a business please send me a PM. That is what I do as one of my businesses.

Hope this helps............
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Re: Reptile Breeding 'Business'

Postby ewertb » Mon Jul 14, 2014 11:32 am

@ rolandslf: I completely agree and understand that as a casual breeder I'm very unlikely to turn a profit but, that depends on what you are breeding, i.e. 1 desert ghost ball sold for R 20000 requires exactly the same expenditure to maintain as one normal ball sold for R1000 even though you may argue that you are far more likely to sell 20 normals than 1 desert ghost. The problem is that when the taxman ever decides to come knocking he is far more likely to notice the R20000 spike than the R1000 ones. Unless you intend hiding all that under your matress so they don't notice, you are going to be ansked some very uncomfertable questions like sgmpanza5 indicated...

From what sgmpanza5 said it might actully be worthwhile to start a private company just for possible tax advantages even though you are operating at a loss? Not sure how trusts work but won't incorporating that be some type of option as well?
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Re: Reptile Breeding 'Business'

Postby sgmpanza5 » Mon Jul 14, 2014 12:16 pm

@ewertb - Personally, I would not recommend setting up a trust. Firstly, trusts are taxed at probably the highest rates (40% of Trust Income). Secondly, the registration procedure is very cumbersome i.e. you have to apply through the high court. Thirdly, to draw up a trust arrangement that will give you the best tax savings and asset protection you will need the services of a trust attorney and accountant (and these are expensive). Whereas just registering a private company is much easier. I'm not saying this so that you can hopefully use my services if you register a private company. (You can use the services of any service provider you want). I'm merely giving my best opinion on the matter by analysing existing facts.

@SA Reptiles Administrators - Please forgive me for turning the thread to a business/tax advisory forum. My intention was to educate not create a tangent.
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Re: Reptile Breeding 'Business'

Postby ewertb » Mon Jul 14, 2014 2:31 pm

Business/tax advisory was what I was aiming for in this thread as I really don't want to end up on the wrong side of Mr. Tax if it could be helped, so thank you for the advise.

I've seen a lot of concern on this forum regarding legallity of keeping what reptiles and where from a conservation point of view, but nothing relating to the finansial/tax law point of view and possible implications of selling reptiles and related things, even if it is just a hobby. Mostly I'm guessing this is out of mostly ignorance regarding these obscure laws but unfortunately it's a topic that I believe requires some consideration and discussion. I think the general point of this conversation to keep in mind is that, even if in a 'business' sense you are making a loss with your casual reptile breeding, you are effectively earning additional income from selling excess babies and need to declare it as such should you fall within the bracket of people that must file returns every year.
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Re: Reptile Breeding 'Business'

Postby Mitton » Mon Jul 14, 2014 4:46 pm

You don't have to worry about this, even if you do make a bit of profit. All you need to do is prove to SARS that it is a hobby, which is easy, and the income is to cover costs then they won't worry.
It gets complicated when you make 100's of 1000's or try and run your expenses and losses (if any) against your income from your monthly salary to get a tax break but I am sure this is not what you want to do.
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Re: Reptile Breeding 'Business'

Postby ewertb » Mon Jul 14, 2014 6:23 pm

Nope, don't care much for tax breaks, just want to keep life simple and stay out of trouble if it can be avoided.

I, silly as it sounds, however have a little dream of one day having my own little stall at a SOS2 or other expo selling some fancy AFT's and ball pythons alongside various, just as fancy carnivorous plants. Will likely have to relook at the tax issue when I reach that point in 5-10 years time... :oops:
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Re: Reptile Breeding 'Business'

Postby rolandslf » Wed Jul 16, 2014 10:27 am

It is not silly at all to want to have a stand at S0S2.
You do not have to have a registered business to have a stand there either.
I look forward to visiting your stand at SOS2 one day, and I bet it will be much sooner than in 10 years time.

I am fully in agreement with Mittons' comment, unless you have those expensive 20k t0 50k pairs, then your sales are exactly that, minor income to cover expenses.
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Re: Reptile Breeding 'Business'

Postby TonyK » Wed Jul 16, 2014 11:34 am

I had one of those small tables at SOS in 2010.Just a simple table and 2 chairs.It was one of the best reptile related experience ever.You will meet such great people both exhibitors as well as customers.Being part of the expo should not just be a dream just make it happen.
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Re: Reptile Breeding 'Business'

Postby sgmpanza5 » Wed Jul 16, 2014 11:51 am

I partly agree with Mitton's and Rolands views on the income from a hobby. True it is that the Income Tax Act does not tax income from a hobby but income from a hobby ( and even gambling) is taxable if it is done in a systematic manner to the extent that it becomes a business or profit making scheme. Now the Act is not clear as to the meaning of "systematic" but Tax professors have commented that the frequency of transactions and the expert knowledge applied in the activity are important factors that SARS considers. Therefore it is not really the amount of money made, per se, that determines whether it is taxable or not but rather the manner in which it is made. So probably, selling one or two or maybe an entire hatched clutch would constitute a hobby but repeatedly doing this year in year out, advertising and seeking buyers, applying expert knowledge in maintaining your snakes, would probably constitute a business. So income generated from this would be included in your taxable income but if is less than R60000 it would be tax free.
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Re: Reptile Breeding 'Business'

Postby Bushviper » Thu Jul 17, 2014 1:37 pm

I know a friend of mine actually contacted SARS about his spider breeding hobby and they told him unless he is a "professional breeder" they are not interested as he cannot even speculate what his income might be. Spiders worth R2000 a few years ago now sell for R20 so it becomes confusing for them and as such unless you are a regular breeder who relies on the income they dont care.

If you register as a business then you do have the advantages listed above but despite what everyone believes I only know of about 10 people in the country who can say they are making a decent income from breeding reptiles. The rest of us are throwing money into a bottom less pit and having fun doing it.

We have had really small time breeders taking a stand at the SOS expo and they are inspired to do better the next year. Often stands cost R750 for a single table if you book early and anybody just trying to move a few excess animals can afford that and have an enjoyable weekend as well.
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Re: Reptile Breeding 'Business'

Postby ewertb » Thu Dec 18, 2014 11:48 am

Getting more excited about having my own one man stand at the expo! :o

Getting my 1st ever pair of balls on Saturday (can't wait!) and hopefully a shipment of carnivorous plants (7 hour long story this... :-x ). So, I'm getting underway for my stand.
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Re: Reptile Breeding 'Business'

Postby Ruan Stander » Thu Dec 18, 2014 9:46 pm

Very nice, best of luck.
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