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What 2017's budget means for you

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Finance Minister Pravin Gordhan's 2017/2018 budget speech is clear evidence of the challenging financial situation in South Africa. But while the budget may have provided little comfort to upper income earners, it is likely to appease the international ratings agencies in the interim. Gordhan's insistence on maintaining financial discipline and containing government debt (which now amounts to more than 50% of GDP) has sent a solid message regarding the financial integrity of the National Treasury.

Here's an overview of how this year's budget affects you:

Personal income tax

One of the biggest surprises contained in this year's budget was the creation of a new "super bracket" for those personal tax payers earning over R1.5 million per year. In future, these taxpayers will be taxed at 45% (up from 41% previously).

All the other tax brackets were adjusted slightly to accommodate bracket creep, but the increases were far less lenient than in previous years.

INCOME TAX: INDIVIDUALS AND TRUSTS

Tax rates for the period from 1 March 2017 to February 2018

Individuals and special trusts

Taxable income (R)

Rate of Tax (R)

R0 - R189 880

18% of taxable income

R189 881 - R296 540

R34 178 + 26% of the amount above R189 880

R296 541 - R410 460

R61 910 + 31% of the amount above R296 540

R410 461 - R555 600

R97 225 + 36% of the amount above R410 460

R555 601 - R708 310

R149 475 + 39% of the amount above R555 600

R708 311 - R1 500 000

R209 032 + 41% of the amount above R708 310

R1 500 001 and above

R533 625 + 45% of the amount above R1 500 000

Trusts other than special trusts

Rate of Tax 45%

Tax Rebates and Tax Thresholds

Rebates

Primary

R13 635

Secondary (Persons 65 and older)

R7 479

Tertiary (Persons 75 and older)

R2 493

 

Age

Below age 65

R75 750

Age 65 to below 75

R117 300

Age 75 and over

R131 150

The primary tax rebate was lifted marginally from R13 500 to R13 650, while rebates for those aged over 65 (R21 114) and over 75 (R23 607) also showed modest increases.

The tax credits for annual contributions to medical aids were also raised slightly to R3 636 (up from R3 432) per person for the first two members and R2 448 (up from R2 304) per person for every additional member.

Tax on businesses

Companies tax remained unchanged at 28% and turnover tax (applicable to micro businesses with a turnover of not more than R1 million per annum) was also unchanged.

Gordhan did, however, announce a slight decrease to the rate of taxes on small business corporations in the two upper brackets.

INCOME TAX: SMALL BUSINESS CORPORATIONS

Financial years ending on any date between 1 April 2017 and 31 March 2018

 

Taxable income (R)

Rate of Tax (R)

R0 - R75 750

0% of taxable income

R75 751 - R365 000

7% of taxable income above R75 750

R365 001 - R550 000

R20 248 + 21% of taxable income above R365 000

R550 001 and above

R59 098 + 28% of taxable income above R550 000

Transfer duties

Gordhan provided some relief for home buyers in lower income brackets by raising the transfer duty threshold to R900 000. This means that home buyers are now exempt from paying transfer duty if the purchase price does not exceed R900 000 (up from R750 000 in the previous budget).

Trusts

The tax on trusts (other than special trusts) was raised significantly from 41% in the past two tax years to 45% for the 1 March 2017 to 28 February 2018 tax year.

Tax-free savings allowance

The National Treasury's ongoing commitment to the establishment of a saving culture received a nod in the form of an increase of the tax-free savings allowance from R30 000 to R33 000 per year.

Dividends withholding tax

There was, however, less positive news for shareholders, with the announcement that dividends withholding tax will rise from 15% to 20%. This increase is effective immediately, with a commencement date of 22 February 2017.

Taxes on fuel

An increase in 30c/litre in the fuel levy and 9c/litre in the road accident fund levy means that each litre of petrol will cost you 39c more in future.

Sin taxes

The so-called "sin taxes" on tobacco and alcohol products are often targeted to bring in extra revenue and this year was no exception. The excise duties on these products were raised by between 6% and 10%. In rand terms, this means smokers will pay R1.06 more for a packet of 20 cigarettes, while sparkling wine increases by 70c a bottle, wine by 26c per bottle, beer and cider by 12c per 330ml and alcoholic spirits by R4.43 for a 750ml bottle.

Non-movers this year

Capital gains tax, estate duty, VAT and donations tax all remained unchanged.

We're here to help

Please contact us to find out how the new budget affects you in the year ahead. The HGG Financial Group is committed to assisting all our clients to comply with their tax requirements, while simultaneously planning ahead for long-term financial stability.