FinMin Tito Mboweni made his goal for the annual Budget Speech clear by referencing Biblical agricultural imagery. The message? To create a prosperous harvest, you must plant anew. Acknowledging the shortcomings of the past – “despite our best efforts, sometimes, ravages and risks such as pests or rot could attack our green shoots” – the Minister called on South Africans to persevere, reminding them that “we must take the bitter with the sweet. Today, I bring you a seed to prove that if we plant anew, we can return to those plum times.”
Let’s have a look at the detail of what that ‘seed’ is going to mean for us as taxpayers.
Personal income tax
No changes will be made to personal income tax brackets.
Tax thresholds (the amount of income you earn before you need to pay tax) will slightly increase.
- If you are under 65, and earn up to R79,000 during the tax year, you will not pay any tax on this amount.
- If between 65 and 75, you will not pay any tax if you earn less than R122, 300.
- If 75 and older, you will not pay any tax if you earn less than R136,750.
By not adjusting the income tax brackets for inflation, the government will raise R12,8bn.
No adjustments to medical aid tax credits
Medical tax credits have been not been adjusted for inflation, so that means when you pay your income tax, you can still claim R310 (per month) for each of the first two persons covered by the Medical Scheme, and thereafter R209 (per month) for each additional dependent.
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. So, for example, you have R690,000 in a Money Market fund, earning 5% per annum interest, and you are over 65, you will not have to pay any tax on the R34,500 interest that you earn.
Tax-free savings account contribution
You can still contribute R33,000 per year toward these investments, in which all returns are tax-free.
Dividends Withholding Tax
This remains at 20%. If you hold shares and a dividend is declared of, for example, R120, R24 will be deducted by the company issuing the dividend, and you will receive an after-tax amount of R96.
You can donate R100,000 each year to anyone you wish, without attracting Donations Tax. Amounts in excess of R100,000 attract Donations Tax at a flat rate of 20%. Donations between spouses are exempt from Donations Tax.
Retirement Fund contribution deductions
There has been no change to the amount that you can claim as a tax deduction towards your retirement funds. The deduction that you can claim is the lower of 27,5% of your taxable income or R350,000 per annum before the inclusion of taxable capital gains.
Capital Gains Tax (CGT)
There has been no change to Capital Gains Tax. Capital gains are triggered by the sale of an asset such as your home or a unit trust. The maximum effective tax rates are:
- 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.
If, for example, you withdraw R100,000 from your unit trust investment, and you initially invested R20,000, you would have triggered a capital gain of R80,000. The first R40,000 of this gain is exempt, and thereafter, 40% of the remaining R40,000 is added to your taxable income, and you will have to pay income tax on this.
Estate Duty remains unchanged. Duty is levied on the dutiable value of an estate at a rate of 20% on the first R30m and at a rate of 25% above R30m. The Estate Duty abatement (exemption) remains unchanged at R3,5ml for each individual.
Anything left to a surviving spouse does not attract Estate Duty on the death of the first spouse.
Changes to Transfer Duty
There have been no changes to Transfer Duty.
Tobacco, alcohol and fuel
A pack of 20 cigarettes will cost you R1.14 more. Your can of beer will cost you 12c more, and your can of coke will cost you 0.11 more per gram (sugar tax). A bottle of wine will cost 22c more, and whiskey is R4.54 more.
General fuel levy increases by 15c per litre and road accident fund levy increases by 5c per litre on 3 April 2019.
A new carbon fuel levy at 9c per litre on petrol and 10c per litre on diesel will be introduced with effect from 5 June 2019.
The burning issue for many South Africans has been, not personal implications, but what stance the government is taking on State-Owned Enterprises such as Eskom, SABC, SAA and Denel. While R23bn has been set aside per year to support Eskom during its reconfiguration, the FinMin emphasised that the government will not be bailing out these enterprises, but rather curating them more carefully through the appointment of Chief Reorganisation Officers.