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Highlights from the 2013 budget

Mart-Marie CombrinckIn his budget speech last month, Minister Pravin Gordhan announced tax relief of R7 billion for individual taxpayers. This article gives an overview of the highlights from his speech.

Medical tax credits

Medical tax credits were introduced last year and have been increased from:

  • R230 to R242 for the first two beneficiaries, and
  • R154 to R162 for every beneficiary thereafter.

The medical credits for a family of four will therefore increase from R768 to R808.

Social grants

Since 2008/09 the social assistance budget has increased by an average of 11% per year.

  • In April, the old-age and disability grants will increase from R1 200 per month to R1 260;
  • The foster care grant will increase from R770 to R800; and
  • The child support grant will increase to R290 in April, and to R300 per month in October.

Personal income tax

Personal income tax brackets and rebates have been adjusted to reduce the effect of inflation on tax payable.

Tax rates for natural persons and special trusts – 2013/2014 tax year
Taxable IncomeRate of tax
R0 – R165 60018% of taxable income
R165 601 – R258 750R29 808 + 25% of taxable income above R165 600
R258 751 – R358 110R53 096 + 30% of taxable income above R258 750
R358 111 – R500 940R82 904 + 35% of taxable income above R358 110
R500 941 – R638 600R132 894 + 38% of taxable income above R500 940
R638 601 and aboveR185 205 + 40% of taxable income above R638 600

Tax rebates

 2012/2013 Tax Year2013/2014 Tax Year
Primary RebateR11 440R12 080
Secondary Rebate (Taxpayers over 65 yearsR6 390R6 750
Tertiary Rebate (Taxpayers over 75 years)R2 130R2 250

The income an individual can earn before being required to pay income tax has been increased as follows for the 2013/14 tax year:

Tax thresholds
 2012/2013 Tax Year2013/2014 Tax Year
Below age 65R63 556R67 111
Age 65 and overR99 056R104 611
Age 75 and overR110 889R117 111

Interest exemption

The interest exemption threshold has been revised and the new exemptions are as follows:

  • R23 800 per annum for taxpayers under the age of 65
  • R34 500 per annum for taxpayers aged 65 years and older

A taxpayer younger than 65 will be able to invest R1 515 183 at 6% per annum without paying tax. Those older than 65 but younger than 75, will be able to invest R2 318 516 at 6% per annum without paying tax, while a taxpayer of 75 and older will be able to invest R2 526 850 at 6% per annum without paying tax.

Business taxes

The annual turnover threshold for small business corporations has been increased to R20 million. The following table will be effective for the years of assessment ending on or after 1 April 2013:

Tax table applicable to Small Business Corporations
Taxable IncomeRate of tax
R0 – R67 1110% of taxable income
R67 112 – R365 0007% of taxable income above R67 111
R365 001 – R550 000R20 852 + 21% of taxable income above R365 000
R550 001 and aboveR59 702 + 28% of taxable income above R550 000

Sin taxes (excise duty) and fuel levies

The following increases were announced:

  • Tax on cigarettes increases by 60c to R10.92 per packet of 20.
  • Tax on a 340 ml can of beer increases by 7.5c.
  • Tax on a bottle of wine increases by 19.5c.
  • Tax on a bottle of spirits increases by R3.60.

The increase in fuel levies (including 8c for the Road Accident Fund) totals 23c per litre.

Tax proposals

i) Incentivised savings products

Government intends to introduce tax-preferred savings and investment accounts by 2015. All returns accrued within these accounts and any withdrawals would be exempt from tax. There will be an initial annual contribution limit of R30 000 and a lifetime limit of R500 000, to be increased regularly with inflation.

ii) Disability and income protection products/policies

The premiums and pay-outs of income disability and lump sum disability have historically been treated differently. It has been proposed that all non-retirement funding income and lump sum disability be treated the same. This means premiums will not be tax deductible and the pay-outs will not be taxed.

iii) Trusts

The intended use of trusts is to serve the needs of its beneficiaries. However, trusts have also been used to reduce taxes in various forms, from income tax to estate duty and capital gains tax. National Treasury therefore intends focussing on the use of trusts, and legislative changes in the way in which trusts are taxed can be expected.

iv) Retirement reform

  • Contributions by employers to retirement funds are to be taxed as a fringe benefit. (Proposed effective date 1 March 2014)
  • Taxpayer deductions for pension, provident and retirement annuity funds are to be consolidated. The cap of such contribution deductions will be at 27.5% of the higher of remuneration or taxable income. A ceiling of R350 000 will apply. (Proposed effective date 1 March 2014)

v) VAT proposed on imported electronics and services

Government proposes that all foreign businesses supplying e-books, music and other electronic services to South Africans, register as VAT Vendors. (Date to be announced)

For more information please contact Mart-Marié Combrinck on 021 852 0382

The complete tax guide can be downloaded via Exceed’s website at www.exceed.co.za.