In his Budget speech last week Finance Minister Tito Mboweni was unexpectedly kind to you, the taxpayer, in setting out the tax rates for the 2021/22 tax year. Many commentators believed the government had no choice but to squeeze South African consumers for more, given its radically worsening debt situation. A wealth tax was mooted, as was an increase in VAT.
These things did not come to pass, thanks in part to an unexpected R99 billion in extra revenue collected last year.
Income tax payers will enjoy some relief, as detailed below, but perhaps the best news is the lack of news. As Doelie Lessing, director & tax specialist at Werksmans Attorneys, says: "No tax rate increases, and no new taxes introduced – what is absent from the Budget is the best and biggest news!"
She says government is still pondering a wealth tax though. "Information is being gathered through third parties and this will help the revenue authorities to assess the feasibility of a wealth tax."
Let's go through your major taxes (and concessions) as an individual, and see where there have been changes:
INCOME TAX
There have been no changes to the rates of tax, with an above-inflation 5% increase to the amounts in the tax brackets (as detailed in the accompanying table). This translates into the following tax savings if your income remains the same:
- Taxpayers under 65 years of age: a saving of R1 580 on an annual taxable income of R250 000; R3 510 on R500 000; and R5 140 on R1 million.
- Taxpayers over 65 but under 75: a saving of R1 994 on R250 000; R3 924 on R500 000; and R5 554 on R1 million.
- Taxpayers aged 75 and over: a saving of R2 129 on R250 000; R4 059 on R500 000; and R5 689 on R1 million.
OTHER TAXES AND DUTIES
- VAT: there will be no increase to the 15% rate. In the 2020/21 tax year VAT accounted for 26.7% of total tax revenue, compared with 25.6% in the previous tax year. Super fine maize meal will be included in the list of zero-rated food items.
- Sin taxes: excise duties on alcohol and tobacco will increase by 8%, effective immediately.
- Fuel levies: inflation-related increases of 15c/litre and 11c/litre will apply to the general fuel levy and the Road Accident Fund levy, respectively, with effect from April 7.
- Capital gains tax: there is no change to the current rates: 40% of any gain will be included in your taxable income, with an annual exclusion of R40 000. Other exclusions include R2 million on the sale of a primary residence and R300 000 in the year of death.
- Dividends tax: the withholding tax on share dividends remains at 20%.
- Donations tax: no changes. Donations to a spouse are tax-free. Those to anyone else remain taxed at 20% on amounts of under R30 million and 25% on anything over R30 million. The first R100 000 is exempt.
- Transfer duty: The duty on the transfer of a property remains the same, according to a table published by SARS and available on its website.
- Taxes on retirement fund withdrawals: taxes on lump-sum withdrawals from retirement funds remain the same. You can view the tables (one for withdrawals at retirement, the other for pre-retirement withdrawals) on the SARS website.
- Estate duty: the rate remains at 20% on the first R30 million and 25% on anything over that. The first R3.5 million is not taxed, and any part of this exemption not used can roll over from the first-dying spouse to the surviving spouse.
CONCESSIONS
- Retirement funds: tax breaks on contributions to retirement funds remain unchanged: you can deduct contributions up to 27.5% of remuneration or taxable income up to R350 000 a year.
- Tax-free investments: the conditions remain unchanged - you can save up to R36 000 a year, with a R500 000 lifetime contribution limit.
- Medical expenses: credits on monthly medical scheme contributions have increased to R332 (up from R319) for the principal member and first dependant and to R224 (up from R215) for additional dependants. Taxpayers under 65 years can claim 25% on out-of-pocket medical expenses and the amount by which medical scheme contributions exceed four times the medical scheme tax credits for the tax year, limited to the amount that exceeds 7.5% of taxable income (excluding retirement fund lump sums and severance benefits). If you are 65 years and older, or if you, your spouse or child has a disability, you can claim 33.3% of qualifying medical and the amount by which medical scheme contributions exceed three times the medical scheme tax credits for the tax year.
- Exemptions on interest income: These remain at R23 800 a year for taxpayers under 65 and R34 500 for those of 65 and over.
- Section 12J investments: the bad news for venture capital investors is that the sunset clause for a 100% deduction on venture capital investments (subject to a minimum amount of R500 000) remains in place. The cut-off date of June 30, 2021 will not be extended.
UIF CEILING INCREASE
The Unemployment Insurance Fund contribution ceiling will be increased to R17 711.58 a month from R14 872 a month with effect from March 1. The maximum monthly contribution for both the employee and employer will increase from R148.72 to R177.12.
PERSONAL FINANCE