Finance Minister Pravin Gordhan delivered a safe, no real surprises budget, with R7 billion personal tax relief, being R2.5 billion less than in the previous tax year 2012/13.
Personal income tax brackets and rebates have been slightly adjusted to reduce the effect of inflation on tax payable. The amount an individual can earn before being required to pay income tax has been increased to:
- R67 111 for individuals below the age of 65
- R104 611 for individuals between 65 and 74
- R117 111 for individuals over 75 years.
The annual tax rebates for individuals have been increased to:
- R12 080 for individuals under the age of 65
- R6 750 for individuals between 65 and 75
- R2 250 for individuals over 75.
The lowest tax bracket remains at a tax rate of 18% (annual taxable income up to R165 600) and the highest tax bracket remains taxable at 40% (annual taxable income of more than R638 600).
One of the biggest changes were for individuals whose taxable income is from one employer and is below R250 000 a year. They are not required to submit income tax returns, however they will still be liable to pay income tax. Previously, this annual earnings limit was R120 000.
This means that there will be more pressure on employers to ensure that tax deductions and calculations on payslips are accurate.
Effective from 1 March 2012 the medical aid capping system was replaced with a tax credit, bringing in equality for all taxpayers under the age of 65 and improved benefits for lower earners. The medical aid tax credit system is also used in the new tax year, commencing 1 March 2013.
Monthly tax credits for medical scheme contributions (reduction of tax payable) will be increased from R230 to R242 for each of the first two beneficiaries on a medical scheme and from R154 to R162 for each additional beneficiary on the medical scheme.
“The medical aid tax credit system will likely result in lower earners receiving greater benefits, which is a good thing,” comments Philip Meyer, technology director of payroll and HR software specialist Sage Pastel Payroll & HR.
Another big proposed change in the Budget Speech effective from March 2014 is that an employer’s contribution to retirement funds on behalf of an employee will be treated as a taxable fringe benefit in the hands of the employee.
Individuals will from that date be allowed to deduct up to 27.5% of the higher of taxable income or employment income for contributions to pension, provident and retirement annuity funds with a maximum annual deduction of R350 000.
Contributions above the cap are carried forward to future tax years. Therefore, all company contributions towards pension, provident and retirement annuity funds will become a fringe benefit and it will increase the total tax deduction. If the company contribution is low, it will only have a small impact on the individual.
However, if the company contribution towards pension, provident and retirement annuity funds is substantial, it will have a bigger effect on the individual’s net pay and because the taxable earnings are greater, the individual will have to pay more tax.
Environmental taxes go up and will affect a large portion of the SA population.
- From 3 April 2013, the general fuel levy will rise by 15 cents per litre to R2.13
- The Road Accident Fund levy will increase by 8 cents per litre to 96 cents per litre of petrol.
- The levy on plastic shopping bags will rise from 4 cents to 6 cents per bag from 1 April 2013.
- The incandescent light bulb levy is to be increased from R3 to R4 per bulb from 1 April 2013.
- The tax on motor vehicle carbon dioxide emissions will increase from 1 April 2013. For passenger cars, the tax will rise from R75 to R90 for every gram of emissions per kilometre above 120 gCO2/km. In the case of double cabs it will increase from R100 to R125 for every gram of emissions per kilometre above 175 gCO2/km.
A policy paper on carbon emissions tax is to be published in 2013 with the view of introducing a carbon tax from 2015.
Subsistence allowances paid to employees who travel for business within South Africa, will be tax-free provided the amount paid for meals and incidental costs does not exceed R319 per day. An amount not exceeding R98 per day for incidental costs only will also be exempt.
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