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Budget 2019: What did the Minister deliver?

Posted 20 February 2019 under TaxTim's Blog


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Budget 2019: What did the Minister deliver?

Mr Minister, you did a fine balancing act on this year’s budget; short-term pain for long-term gain.

Although no one was expecting any tax increases in the new Minister’s budget, taxpayers had hoped for some relief in an adjustment to the tax brackets for inflation or at least part of it. Today the Minister announced no such relief for taxpayers. Instead he announced a mere R850 increase per year in the tax free threshold to R79 000 per year for those under 65 years old.

However, it was not all doom and gloom. The Minister also announced some good news around SARS which will receive a new commissioner within a few weeks and strengthening of the IT systems which should enable a smoother filing process each year.

There were also encouraging signs of innovative thinking in terms of assisting new job seekers, first time home buyers and seeking to deal with debt laden state owned enterprises. The Minister also announced no salary increases for certain public sector workers and increased spending to Health services where they are needed. He is set on tackling high government expenditure and waste. Importantly, the Minister announced revisions to how state owned entities tap into government funding to reign in the ballooning debt at organisations like Eskom have built up over the years. The Minister has announced increases in infrastructure expenditure to stimulate the economy.

Finally on the good news front, white bread flour, cake flour and sanitary pads will be zero-rated for VAT purposes from 1 April 2019. Sin taxes, this year, actually increased at a lower rate than last year which was a welcome surprise.

That’s where the good news ends…

Personal Tax Rates (rates below)

Individuals, across the country, earning qualifying income above the new tax threshold of R79 000 (previously R78 150) will be paying increased taxes of R12.8bn (previously R6.8bn in actual tax increases) for the next tax year. No adjustment has been made for inflation so that means if you receive an increase from your employer, you will actually be paying more tax in real terms. So just because inflation went up, doesn’t mean SARS lets you off the hook.

You will essentially see the most minor increase in take home pay on your payslips each month from 1 March. The only good news here is that there was no tax increase!   

Taxpayers over 65 and below 75 years of age will have their first R122 300 tax free (previously R121 000) and those taxpayers over 75 years of age will be tax free from R136 750 (previously R135 300) of income. 

Super earners are still going to be taxed a whopping 45% per every R1 earned above R1 500 000 per year being at least R532 041, no change from prior year. Therefore the biggest earners still pay the most tax each year.

You can see what the tax changes do to your monthly take home pay by clicking on our updated take-home pay calculator  

Taxable Income (R) Rate of Tax (R)
0 - 195 850 18% of taxable income 
195 851 - 305 850 35 253 + 26% of taxable income above 195 850 
305 851 - 423 300 63 853 + 31% of taxable income above 305 850
423 301 - 555 600 100 263 + 36% of taxable income above 423 300
555 601 - 708 310    147 891 + 39% of taxable income above 555 600
708 311 - 1 500 000 207 448 + 41% of taxable income above 708 310  
1 500 001 and above   532 041 of taxable income above 1 500 000 


The following taxes and tax credits remain the same for 2019/2020

Capital Gains Tax

There were no changes to CGT this year. Individuals still have to include 40% of the gain in their income while companies and trusts still have to include 80% of the gain into their income. The overall maximum effective tax rates for individuals remains unchanged from last year at 18% and for companies and trusts it also stays the same at 22.4% and 36% respectively.

Dividends

The Withholding Tax on Dividends remains the same at 20%.

Estate Tax and Donations Tax

Donations Tax remains unchanged – it is levied on amounts over R100 000 in total per year at 20% and at a rate of 25% on donation values exceeding R30m. Remember that donations between spouses are still tax free! 

The Estate Duty threshold above R3.5m will still be taxed at 20%, however for those huge estates over R30m, will be taxed at 25%.

Interest and investment exemptions

The interest exemption thresholds stay at R23 800 for those under 65 years of age and R34 500 for those over 65. Tax free investments, which means no Dividends Tax, no CGT and no Income Tax for investments are still capped at R500 000 over a lifetime will keep its annual contribution limit of R33 000.

Medical Tax Credits – NO CHANGES

You and your first dependent will be allowed a tax credit of R310 (previously R310) and thereafter R209 (previously R209) for all other dependents. Fortunately the minister has not announced that the medical tax credit will be scrapped, not yet anyway!

Lump sum pay-outs (rates below)

No changes on the taxable rates of lump sums and the retirement laws which allow provident funds to be deductible alongside retirement annuity and pension fund contributions remain the same. The regime allows for a capped 27.5% of the greater of Gross Income (so all earnings) or Taxable Income (income after deductions) to the max of R350 000 per year.

Retirement fund lump sum withdrawal benefits 

Taxable Income (R)  Rate of Tax (R)
0 - 25 000 0% of taxable income 
25 001 - 660 000  18% of taxable income above 25 000
660 001 - 990 000   114 300 + 27% of taxable income above 660 000
990 001 and above  203 400 + 36% of taxable income above 990 000


Retirement fund lump sum benefits or severance benefits 

Taxable Income (R) Rate of Tax (R)
0 - 500 000   0% of taxable income 
500 001 - 700 000 18% of taxable income above 500 000 
700 001 - 1 050 000 36 000 + 27% of taxable income above 700 000
1 050 001 and above  130 500 + 36% of taxable income above 1 050 000


Small Business Tax (rates below)

These rates have moved by a whopping R59.50 (previously R168) less tax payable for businesses who earn less than R79 000. We still believe that small business’ are not being looked at properly and deserve some better tax treatment!

1) Income Tax: Small Business Corporations 

Taxable Income (R) Rate of Tax (R)
0 - 79 000   0% of taxable income 
79 001 - 365 000 7% of taxable income above 79 000
365 001 - 550 000 20 020 + 21% of taxable income above 365 000
550 001 and above  58 930 + 28% of the amount above 550 000


2) Turnover Tax for Micro Businesses

Taxable turnover (R) Rate of Tax (R) 
0 - 335 000 0% of taxable turnover 
335 001 - 500 000  1% of taxable turnover above 335 000
500 001 - 750 000  1 650 + 2% of  taxable turnover above 500 000
750 001 and above  6 650 + 3% of taxable turnover above 750 000


Sin Taxes

Those “sinners” amongst us are as always hit by large increases this year. Wine will now set you back between 22c and 84c (previously 23c and 73c) per litre more while beer and spirits will now cost 12c (previously 15c) and R4.54 (previously R4.80) more respectively. Ciggies, a pet hate of government, will now cost you an extra R1.14 (previously R1.22) per packet.

Road accident fund levies have increased by 5c (previously 30c), but unfortunately we will be paying more for petrol and diesel as fuel levies have gone up by 15c a litre (previously 22c) per litre from 1 April. The lower increases are due to the already high petrol and diesel increases we have seen at the pump this last year.

A new carbon fuel levy  of 9c/l on petrol and 10c/l on diesel will be introduced from 5 June.



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