Month: February 2017

The 2017 Budget Speech – the lion speaks today

Finance Minister, Pravin Gordhan, has won respect, locally and globally, for his courage and resilience in the face of tremendous pressure. Today’s Budget Speech was arguably his most challenging to date …

His assertion: “If lions work as a team, they will bring down even a buffalo” makes it clear that our FinMin intends South Africans to work together to bring about the economic transformation that will, in the words of Oliver Tambo: “create a united democratic and non-racial society … to remake our part of the world into a corner of the globe of which all of humanity can be proud.”

Here follows a summary of the main points of the Speech:

Personal income tax
A new tax rate of 45% has been introduced for those who earn above R1.5 million per year.

Tax threshold
This refers to the amount of income you earn before you need to pay tax. The new thresholds are as follows:

  • if you are under age 65, your yearly tax threshold is R75,750;
  • if you are between 65 and 75, the threshold is R117,300; and
  • if you are 75 or older, the threshold is R131,150.

Interest exemption
The interest exemption amounts remain the same. If you are under age 65, the annual interest exemption is R23,800, and if you are 65 and older, the exemption is R34,500.

How will the tax threshold and interest exemption changes affect you?
If you are between the ages of 65 and 75, you can earn a yearly income of R117,300 plus R34,500 interest before you have to pay tax. If you are 75 or older, you can earn an annual income of R131,150 plus R34,500 interest before you have to pay tax.

Tax-free savings account contribution increased
From 1 March 2017, you can contribute R33,000 per year toward these investments, in which all returns are tax-free.

Dividends Withholding Tax
A surprise in this Budget Speech is that Dividends Withholding Tax will increase from 15% to 20%.

Retirement Fund contribution deductions
Retirement Fund contribution deductions are standardised across all types of Retirement Funds. A significant benefit for those earning up to R1,27 million a year is that they can deduct up to R350,000 on their Retirement Fund contributions. The deduction is, however, capped at R350,000 (even if you are contributing more than this!).

Capital Gains Tax (CGT)
The effective tax you’ll pay on capital gains may increase if your tax rate goes up to 45%.

If this is the case, the maximum effective tax will be as follows:

  • Individuals and special trusts: 18% (inclusion rate of 40%)
  • Companies: 22.4% (inclusion rate of 80%)
  • Trusts: 36% (inclusion rate of 80%).

The capital gains exemption thresholds remain the same:

  • The annual exclusion stays at R40,000
  • The exclusion amount on death stays at R300,000
  • The primary residence exclusion stays at R2 million.

Adjustments to medical aid tax credits
Medical tax credits have been adjusted for inflation as follows:

  • R303 per month for the main member and the first dependant on a medical scheme; and
  • R204 per month for each additional dependant.

An important factor to bear in mind is that Treasury is considering a possible reduction to medical tax credits in future. This will be to finance National Health Insurance (NHI).

Estate Duty
Estate Duty tax remains unchanged at 20%. You are allowed a basic deduction of R3.5 million on your estate when you die. You do not pay Estate Duty on the value of your Retirement Funds or on the value of the assets you leave to your surviving spouse.

The Davis Tax Committee has submitted its proposals on the Estate Duty system, and we will keep you abreast of developments.

Loans to Trusts
From 1 March 2017, existing and future loans to Trusts will attract 8% interest per year. This is taxable in the lender’s hands. The 8% interest will be deemed a donation, and will attract donations tax of 20% each year. Please speak to your financial planner to discuss how this affects you.

Offshore Special Voluntary Disclosure Programme
SARS will start receiving offshore third party financial data from other tax authorities this year. If you have undeclared offshore assets and income, Government has offered a Special Voluntary Disclosure Programme. This has been extended to 31 August 2017 to enable you to regularise your affairs.

Changes to transfer duty
There has been only one change here: if you buy a property up to the value of R900,000 (previously R750,000), you will pay no transfer duty.

Tobacco, alcohol and fuel
You will pay between 6% and 10% more for your favourite tipple and smoke. Should you wish to add a Coke to your Klippies, await Treasury’s pronouncement on sugar tax.

Tax on fuel will increase by 39c per litre from 5 April.

Conclusion
Ever optimistic, our Finance Minister ended with the following sentiment:

“If we make the right choices, and do the right things, we will achieve a just and fair society, founded on human dignity and equality. We will indeed transform our economy and country so that we all live in dignity, peace and wellbeing.”

Warm regards
John Campbell

Alzheimer’s: what not to forget

In her fifties, my gran developed Alzheimer’s. I remember visiting her as a child. One of my first experiences of her illness was when she began to lose her ability to filter what she said to those around her. On one occasion, I took a friend along with me to see her. It turns out my gran didn’t like my friend. So what did she do? She told my friend to leave! This is not something she would normally have done – not the gran that I knew.

Health changes people – for better or worse

And we had no idea at the time how my gran’s health, or lack of it, was changing her. We even thought that she had been drinking secretly, so unpredictable was her behaviour. But of course, this wasn’t the case at all and it was just a few months later that she was diagnosed with early-stage Alzheimer’s. I had always understood that this disease is genetic and somewhere at the back of my mind, I’ve worried that I might fall prey to it too. Watching her deteriorating was devastating.

But a recent Carte Blanche episode shed some light on the subject. It’s estimated that 9.9 million new cases of Alzheimer’s are reported annually – and while nothing can cure this disease, some simple lifestyle choices can help prevent it.

The three pillars of health

What we eat, how we move and how we sleep – research and the experts tell us that, done well, they can help push back this disease. That’s because the cell loss process begins 20 years before the disease presents. Plus, the role of genetics is less than researchers first thought. It’s actually environmental factors that determine if it develops. That’s encouraging for me – because it means there is less left to fate and more that I can manage.

Take action as early as you can
Physical fitness is all-important. Did you know that all it takes is brisk walking to reverse brain-size decreasing, something that happens in old age? And eating well is essential; when it comes to keeping Alzheimer’s at bay, a Mediterranean diet is encouraged. Did you know that olive-growing regions rich in fish, vegetables (especially leafy, green ones), fruit and seeds benefit us cognitively and reduce our risks? Sleep, that third – and one of my favourite things – pillar (or is it pillow?) is important for brain function. The slow wave sleep phase is when your brain development increases.

Will these three pillars eliminate your risk of Alzheimer’s? No. But apparently, they can more than halve it! That’s a statistic I’m happy to work with.

So, to the three pillars then! And to a cruise on the Med – purely for health purposes, of course!

Warm regards

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