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2017/2018 Budget - The rich are going to pay more, but what does that mean for the rest of us?

Posted 22 February 2017 under TaxTim's Blog


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2017/2018 Budget - The rich are going to pay more, but what does that mean for the rest of us?


Personal Tax Rates (rates below)

Individuals across the country, those qualifying above the new tax threshold of R75 750 (previously R75 000) will be paying increased taxes of R16.5bn (previously R5.65bn in actual tax increase) for the next tax year, most of this will be for high income earners, however. Taxpayers generally across the board will be earning the tiniest bit more money each year as their tax brackets have shifted outwards, but, due to high inflation these savings will still be affected up by increased prices and so the minister has hardly been kind to taxpayers here.

 

The HUGE change announced by the minister, this year, is the addition of a super bracket for the wealthiest individuals who are earning more than R1 500 000 per year. These super earners are going to be taxed a whopping 45% per every R1 earned above this amount. Essentially people earning more than R1 500 000 per year will be taxed at least R533 625.

 

Capital Gains Tax

Investors seeking to earn a return on their assets either in the form of homes or shares on the market or similar investments such as: investing in small and medium businesses, should breath a MASSIVE sigh of relief as CGT rates have not gone up at all for individuals who still have to include 40% of the gain in their income whereas companies and trusts still have to include 80% of the gain into their income. Overall maximum rates 18% (16.4%) and for companies and trusts to 22.4% (22.4%) and 36% (32.8%) effectively on the gains made.


Dividends

Investors, just because your CGT hasn’t gone up, don’t think you've been let off the hook… The Minister announced an effective 33.33% jump, Withholding Tax on Dividends to 20%. Previously this was 15%. This means companies will hold back 20% as a once off tax of the amount received as a dividend before it hits your bank account. Is this going to have an impact on your investment decisions?

 
Trusts

The Minister has announced that Trusts, no longer a good tool for tax efficiency, will attract a tax rate of 45%. This is in-line with the new super tax rate on individuals to avoid any funny transactions.


Interest and investment exemptions

There have been no changes to the interest exemption thresholds. Remaining at R23 800 for those under 65 years of age and R34 500 for those over 65. Tax Free Savings account which means investors will attract no Dividends Tax, CGT and Income Tax for investments capped at R500 000 i.e. this means 16 years at the current rate, over a lifetime with an annual limit of R33 000 (previously R30 000).


Medical Tax Credits

You and your first dependent will be allowed a tax credit of R303 (previously R286) and thereafter R204 (previously R192) for all other dependents. This increase is seemingly in keeping with the minister’s inflation linked adjustments. The Minister has announced that these rates will be subject to decreases in future to cover the expenditure on the National Health Service, taxpayers should watch out for this.

 

Lump sum pay-outs (rates below)

No changes in 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.

 

Small Business Tax (rates below)

Small business expecting any relief will be pleased to know that R52 will be taken off their tax bill for businesses who have taxable income over R550 000. It seems once again that small businesses cannot catch a break, a tax break that is!


Sin Taxes

Those “sinners” amongst us are going to be hit massively as part of an R5.1bn tax increase on this type of activity. Wine, per sparkling bottle, will now set you back between 26c and 70c (previously 18c and 27c) per litre more while beer and spirits will now cost 12c (previously 11c) and R4.43 (previously R3.94) more respectively. Ciggies, a pet hate of government, will now cost you an extra R1.06 (previously 82c) per packet.

Road accident fund levies have increased by 9c (previously 0c), but unfortunately we will be paying more for petrol and diesel as fuel levies have gone up by 30c a litre (previously 30c) per litre from April 5th 2017.

 
At least, the good news is, there are no VAT increases this year, but those receiving social grants can expect their small increase as assistance.

Income Tax Thresholds


Tax Year

2017 (1 March 2016 to 28 February 2017)

2018 (1 March 2017 to 28 February 2018)

Below age 65

R75 000

R75 750

Age 65 to below 75 

R116 150

R117 300

Age 75 and over

R129 850

R131 150


Income Tax Payable: Individuals and Special Trusts

Taxable Income (R)

Rate of Tax (R) 

0 – 189 880

18% of taxable income

189 881 - 296 540

34 178 + 26% of taxable income above 189 880

296 541 – 410 460

61 910 + 31% of taxable income above 296 540

410 461 – 555 600

97 225 + 36% of taxable income above 410 460

555 601 – 708 310

149 475 + 39% of taxable income above 555 600

708 311 - 1 500 000 

209 032 + 41% of taxable income above 708 310

1 500 001 and above

533 625 + 45% of taxable income above 1 500 000

 
Calculate how much tax you'll pay and how much you'll take home with our easy Income Tax Calculator (Updated for the revised 2018 tables!) 


Income Tax Payable: Small Business Corporations

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

Taxable Income (R)

Rate of Tax (R) 

0 – 75 750

0% of taxable income

75 751 - 365 000

7% of taxable income above 75 750

365 001 – 550 000

20 248 + 21% of taxable income above 365 000

550 001 and above

59 098 + 28% of taxable income above 550 000


Turnover Tax Payable: Micro Businesses

Financial years ending on any date between 1 March 2017 and 28 February 2018

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

500 000 - 750 000

1 650 + 2% of taxable turnover above 500 000

550 001 and above

6 650 + 3% of taxable turnover above 550 000

 

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

 

Taxation of Capital Gains

Capital gains on the disposal of assets are included in taxable income.

Maximum effective rate of tax:

Individuals and special trusts

18%

Companies

22.4%

Other trusts

36%



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