BUDGET UPDATE 2016 – WHAT DOES THIS MEAN FOR YOU?

 

INDIVIDUALS :

 

A new tax bracket of 45% for taxable income above R1.5 million has been introduced apparently affecting a mere 100,000 people but expecting to generate an additional

R16,5 billion in tax revenue. 

 

Minor tax relief on income tax monthly as per the table below effective 1/03/2017:

The tax threshold for under 65’s shifted marginally to R6312,50 per month / R75750 per annum and for over 65’s to R9775 per month/ R117300 per annum.  Over 75’s can earn R10,929 per month or R131,150 per annum without paying any tax.

 

Taxpayers below 65 (Source National Treasury)

Taxable income (R)	2016/17 rates (R)	Proposed 2017/18 rates (R)	Tax change (R)	% change
85 000	1 800	1 665	-135	-7.5%
90 000	2 700	2 565	-135	-5.0%
100 000	4 500	4 365	-135	-3.0%
120 000	8 100	7 965	-135	-1.7%
150 000	13 500	13 365	-135	-1.0%
200 000	23 460	23 174	-285	-1.2%
250 000	36 460	36 174	-285	-0.8%
300 000	49 780	49 347	-432	-0.9%
400 000	80 780	80 347	-432	-0.5%
500 000	116 460	115 824	-635	-0.5%
750 000	213 431	212 490	-941	-0.4%
1 000 000	315 931	314 990	-941	-0.3%
1 500 000	520 931	519 990	-941	-0.2%
2 000 000	725 931	744 990	19 059	2.6%

 

 

Capital Gains tax has increased for indivduals from 16.4% to 18% and the annual CGT exclusion is unchanged at R40,000 for natural personals and special trusts, likewise the lifetime CGT exclusion on death remains at R300,000. 

 

The interest Exemption has remained at R23,800 for indivuals under 65 and R34,500 for tax payers over 65.   However the tax free savings account limits increased to R33,000 per individual per annum.  The R500,000 lifetime exemption was not changed but with the annual limits on tax free savings increasing the expectation is that the lifetime limit will be increased in time as well.

 

Preservation at Retirement:

One of the recent amendments for retirement fund members is that they no longer are forced to access their retirement benefits when they elect to retire. Previously if a retirement fund member elected to retire then they would have to access their retirement benefits (cash and /or compulsory annuity). Treasury amended tax legislation to allow retiring employees to elect when to access their retirement benefits after they reached retirement age.  So you can literally work until they put you in a box, and if you did your retirement benefits would be passed onto your beneficiaries free of any estate duty, or executors fees. 

 

Tax considerations for clients working abroad:

Currently, if you work in a foreign country for more than 183 days a year then the foreign income earned is exempt from South African tax subject to certain conditions. At the same time, if the tax payer is also exempt from tax in that foreign country, they benefit from not having to pay tax in either country.

 

Treasury is now proposing that the foreign income tax exemption should only be allowed if the taxpayer is subject to tax in the foreign country.

 

If you’ve invested in shares, you can expect to receive a lower dividend payout after the dividend withholding tax rate was increased from 15% to 20%, but on the upside Medical tax credits have been increased to R303 for a main member or R606 for main member + 1 dependent + R204 for each additional dependent thereafter.

 

If you are buying a property, Transfer Duty Rates now as follows :

 

The good news is that the zero-rate bracket for transfer duty has been raised from R750 000 to R900 000.  On a property of R900 000, the saving will be R4 500.

 

Taxable Income	Rate of Tax
R0 – R900,000	0% of property value
R900,001 – R1,250,000	3% of property value above R900,000
R1,250,001 – R1,750,000	R10,500 + 6% of property value above R1,250,000
R1,750,001 – R2,250,000	R40,500 + 8% of property value above R1,750,000
R2,250,000 – R10,000,000	R80,500 + 11% of property value above R2,250,000
R10,000,001 and above	R933,000 + 13% of property value above R10,000,000

 

 

And finally:

• Fuel levy increase proposal 30cp/l and road accident fund increase of 9cp/l from 5 April 2017
• Further Sin tax increases for alcohol and cigarettes, a bottle of spirits now up by R4,43 per 750ml bottle, beer up by 12c per can and a box of 20’s now up by R1,06
• Sugar tax yet to be promulgated, proposed to be 2,1c per gram of sugar for items with a content above 4g per 100ml

 

If you are a rep on the road, the travel allowance tables have been adjusted upwards so that the rate at which employers can reimburse employees for business travel is now R3,55 per km from R3,29 and for 12,000 km’s rather than the previous 8,000 km’s.