SA Budget speech 2013

Pravin Gordon

BUDGET SPEECH 2013/14

*Pravin Gordon’s 2013/2014 Budget Speech – 27th February 2013*

How does this affect individuals?

The maximum marginal rate for natural persons remains at 40% and is reached where taxable income exceeds R638 600 (previously R617 000).

The minimum rate of tax remains at 18% on taxable income not exceeding R165 600 (previously R160 000).

The primary rebate for all natural persons has been increased to R12 080 (previously R11 440). The additional rebate for persons aged 65 years and older has also been increased to R6 750 (previously R6 390). Persons aged 75 and older are granted a further R2 250 (previously R2 130).

The tax free portion of interest income increases to R23 800 (previously R22 800) for taxpayers under 65 years, and R34 500 (previously R33 000) for persons aged 65 years and older.

Foreign dividends are taxed at a rate of 15%, but this may be reduced in terms of Double Tax Treaties.
Local dividends remain subject to a flat 15% rate. (See para 2 below).

Taxpayers over 65 years continue to be exempt from the payment of provisional tax, provided their taxable income does not exceed R120 000 per annum and is derived solely from salary, interest, dividends and rental.

What about companies and closed corporations

The rate of normal tax remains at 28%.

A final withholding dividend tax at the flat rate of 15% on shareholders, remains in place.
Tax Exempt bodies (e.g. Retirement Funds) will suffer no withholding tax upon production of a tax exemption certificate.

Trusts

The flat rate of 40% remains unchanged, although distributions in the same tax year are taxed instead in the beneficiaries hands. The tax regime governing trusts is under review.

Individual tax thresholds

Liability for tax commences as follows:

Under 65 years: R 67 111 (previously R63 556)
65 years and older: R104 611 (previously R99 056)
75 years and older: R117 111 (previously R110 889)

Income Tax: Individuals and special trusts

 

Taxable Income (R) Rates of tax
0 – R165 600 18% of taxable income
165 601 – 258 750 R29 808 +25% of the amount above R165 600
258 751 – 358 110 R53 096 +30% of the amount above R258 750
358 111 – 500 940 R82 904 +35% of the amount above R358 110
500 941 – 638 600 R132 894 +38% of the amount above R500 940
638 601 and above R185 205 +40% of the amount above R638 600

 

The estate duty abatement (exempt threshold) remains at R3,5 million per person and a surviving spouse may also benefit automatically from any unused deduction in the first dying spouse’s estate. i.e. The abatement remains a combined maximum R7 million for the second dying spouse.

The first R100 000 of property donated in each tax year by a natural person remains exempt from donations tax as do donations between spouses.

Capital Gains Tax (CGT)

The annual capital gain exclusion for individuals remains at R30 000.

? The primary residence exclusion from capital gains tax remains at R2 million.
? The capital gain exclusion at death remains at R300 000.
? The effective rate of CGT is the range of 6% to 13,3% for individuals, 18,6% for companies and 26,7% for Trusts, although correctly structured Trusts can result in the individual rate being applicable.

Transfer Duty

The rates remain, i.e. property costing less than R600 000 will attract no duty. A 3 percent rate applies between R600 000 and R1 million, 5 per cent between R1 million and R1,5 million and 8 percent thereafter.

Medical Expenses

• Taxpayers 65 and older may claim all qualifying expenditure.

• Taxpayers under 65 may claim all qualifying medical expenses where the taxpayer or the taxpayer’s spouse or child is a person with a disability.
• Other taxpayers under 65 may in determining tax payable deduct monthly contributions to medical schemes (a tax rebate to be known as a medical scheme fees tax credit) up to R242 for each of the taxpayer and the first dependant on the medical scheme and R162` for each additional dependant. When determining taxable income they can also claim a deduction for medical scheme contributions exceeding four times the amount of the medical schemes fees tax credits and any other medical expenses limited to the amount which exceeds 7.5% of taxable income.

VAT

The rate of 14% remains unchanged and the compulsory VAT registration threshold remains at R1 million.

To summarise the 2013/2014 budget speech

To be honest, the TAX break was really unexpected however, they fail to alleviate the need for spending cuts. With petrol prices increasing, with the price of alcohol and cigarettes on the up and with the introduction of the e-tolling system now coming to the fore, it seems as though a TAX break is not enough…

I think South Africa needs to brace themselves for tougher times in the economy this year.

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