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The effect of the 2013/14 annual budget speech on the average South African taxpayer

It was with great enthusiasm that we at TaxTim awaited delivery by the Minister of Finance of his annual budget speech this afternoon, especially after some of the shocks experienced by taxpayers and tax professionals last year. Surprisingly he delivered a very mild budget in terms of individuals with the Minister stating, “No tax rises.” The main focus areas relating to tax in this budget speech were on compliance, tax evasion and big companies seeking to shift their income around the world in order to avoid higher taxes. It seems the minister has realised that individuals cannot cough up any more in taxes than they are already and is looking instead to make money from tax dodgers both locally and internationally.

What was great to hear was the minister congratulating taxpayers, those who are tax compliant and pay their taxes so dutifully every year. The minister took a very harsh tone to the fact that while taxpayers have no problem doing their duty paying taxes, they would like to see the money being spent efficiently and effectively – with no more corruption and wastage. To this end the minister introduced some very specific programs to address these issues and instead ensure that the hard earned taxpayer’s money is going towards the services and infrastructure spending required to grow the country.

The minister announced some spending cuts, partially due to the total tax amount collected previously being less than what was thought, but also due to economic circumstances around the world. The bottom line being that government is taking action to decrease unnecessary spending. The minister did warn however that if the country did not grow at a faster pace then there will be an increase in taxes – so taxpayers, continue submitting your returns and paying your tax, as well as actively work at stamping out corruption wherever you can to be part of growing the economy. This will avoid you being taxed more in the future.

So despite specifics on how good or bad the budget was, on the whole we were left feeling very positive about things and the future of SA in general. So all good in our estimation!

The numbers:

Personal Tax Rates

Individuals across the country, those qualifying above the new tax threshold of R67 111 (previously R63 556) per annum will have personal tax relief of R7bn for the next tax year. Unfortunately this isn’t per person, but overall. This change represents a 5.6% increase from the previous tax year so in effect it is really just a jump for inflation. What this really means is that taxpayers earning above this amount, but earning below R165 000 (previously R160 000) will now be saving R990 in taxes. Don’t get too excited though, this is mostly equivalent to how much inflation will reduce the value of your money. It’s what tax people call “the fiscal drag.” Those taxpayers fortunate enough to earn more at the top threshold of R638 601 (previously R617 001) will be saving R3 015 per year – still just enough to beat inflation. Interesting to note though that those taxpayers earning more than R500 000 per year contribute 55% towards the overall tax bill, but are only getting 8% of the R7bn relief.

Interest exemptions

These have for, what we are told is the last time, increased to R23 800 (previously R22 800) for those under 65 years of age and R34 500 (previously R33 000) for those over 65. This allows at least a portion of the return on investments you own which generate interest or foreign dividends to be tax free.

Medical Tax Credits

The new medical tax credit system, introduced last year, will be slightly adjusted to allow for R350m in savings this tax year. You and your first dependent will be allowed a tax credit of R242 (previously R230) and thereafter R162 (previously R154) for all other dependents. This increase is seemingly in step with the minister’s inflation-linked adjustments.

Small Business Tax

Many taxpayers run their own registered business and often these businesses are a driver of a strong economy. In order to promote and provide a sound environment for this, the Minister has increased the turnover threshold, the money taken in, to R20m (previously R14m) per year and has added a 21% tax rate for earning between R365 001 and R550 000 per annum. Businesses earning over R550 000 in profit will be taxed at 28%, but this does add a lot of incentive to small business to keep going.

Sin Taxes

Those horrible taxes that no one wants to pay, but you just can’t get away from. Wine will now set you back a further 7.3c per litre while beer and spirits will now cost 7.5cents and R3.60 more respectively. Ciggies, a pet hate of government, will now cost you an extra 60c per packet.

Another minor tax change that may be of concern is the increase of 2c on each plastic packet that you buy at the shop. Unfortunately most shoppers forget their bags from before and are forced to buy new ones at the till, annoyingly with no option provided for recycling their old, damaged bags. Last, but unfortunately not least will be the increase in fuel levies of 23c per litre. While 8c of this goes towards the Road Accident Fund (and hopefully no one reading this will ever need it) it is still a much needed cause. The increase in the price of petrol however combined with this 23c jump does make things really tough for the taxpayer and so Minister Gordhan has allowed a reimbursive amount of R3.24 per kilometre (previously R3.05) for those travelling for work purposes.

So all in all we saw a good strong budget aimed at growth, providing jobs, social services and dealing with corruption. Whether this will be the case remains to be seen, but positive thoughts and positive results will result in negative taxes!

For a comprehensive summary, listen to TaxTim co-founder Marc Sevitz discuss the budget with Bruce Whitfield on The Money Show, Cape Talk 567:

Tax Thresholds:
Age 2013 tax year (1 Mar 12 - 28 Feb 13) 2014 tax year (1 Mar 13 - 28 Feb 14)
Below age 65 R63 556 R67 111
Age 65 and over R99 056 R104 611
Age 75 and over R110 889 R117 111

Income tax tables:

Taxable income (R) Tax rate
R0 - R165 600
R165 601 - R258 750
R258 751 - R358 110
R358 111 - R500 940
R500 941 - R638 600
R638 601 and above
18% of each R1
R29 808 + 25% of the amount above R165 600
R53 096 + 30% of the amount above R258 750
R82 904 + 35% of the amount above R358 110
R132 894 + 38% of the amount above R500 940
R185 205 + 40% of the amount above R638 600

Tax Rebates

Tax Threshold
Primary (under 65 years old) R12 080
Additional (between 65 - 75 years old) R6 750
Third Rebate(Persons 75 and older) R2 250
Below age 65 R67 111
Age 65 - 75 R104 611
Age 75 and over R117 111

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