Budget 2016 Tax Proposals.

A short summary of some of the tax proposals announced by the Minister of Finance, Pravin Gordhan in his budget on 24 February 2016.
As far as income tax is concerned, these proposals are applicable to the 2017 tax year, i.e. year ending 28 February 2017 for natural persons. Amounts shown in brackets refer to the previous year.

Please note that this is just a summary as proposed made by the Minister and may differ from the final legislation.

Personal Tax: Individuals

• Lowest tax rate of 18% applicable on taxable income up to R188 000 (R181 900)
• Maximum marginal rate unchanged at 41% on taxable income above R701 300 (unchanged)
• Individuals and special trusts

Taxable Income ( R)	Rate of Tax (R)
0 – 188 000	18% of taxable income
188 001 – 293 600	33 840 + 26% of taxable income above 188 000
293 601 – 406 400	61 296 + 31% of taxable income above 293 600
406 401 – 550 100	96 264 + 36% of taxable income above 406 400
550 101 – 701 300	147 996 + 39% of taxable income above 550 100
701 301 and above	206 964 + 41% of taxable income above 701 300

• Trusts other than special trusts: Rate of Tax 41%
• Rebate under 65 years of age – R13 500 (R13 257)
  65 years and older – R20 907 (R20 664)
  75 years and older – R23 373 (R23 130)
• Interest exemption under 65 years of age – R23 800 (unchanged)
  65 years and older – R34 500 (unchanged)
• Tax threshold R75 000 (R73 650)
  65 years and older – R116 150 (R114 800)
  75 years and older – R129 850 (R128 500)
• Medical fund contributions qualify for medical tax credits per year of R3 432 (R3 240) per person for the first two members and R2 304 (R2 172) per person for each additional member.
• Tax brackets in respect of lump sum benefits on retirement are unchanged (see table below)

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

Transfer Duty

Amended in respect of properties bought on or after 1 March 2016. ALL natural persons and legal entities:

New – From 1 March 2016
R0 – R750 000 : Nil
R750 001 to R1 250 000 : 3% above R750 000
R1 250 001 to R1 750 000 : R15 000 + 6% above R1 250 000
R1 750 001 to R2 250 000 : R45 000 + 8% above R1 750 000
R2 250 001 to R10 000 000 : R85 000 + 11% above R2 250 000
Above R10 000 001 : R937 500 + 13% above R10 000 000

Previous – Until 28 February 2016
R0 – R750 000 : Nil
R750 001 – R1 250 000 : 3% above R750 000
R1 250 001 – R1 750 000 : R15 000 + 6% above R1 250 000
R1 750 001 – R2 250 000 : R45 000 + 8% above R1 750 000
Above R2 250 001 : R85 000 + 11% above R2 250 000

Donations Tax (unchanged)

• Exempt up to R100 000 p.a.
• Donations tax payable at 20% by donor

Estate Duty (unchanged)

• Basic deduction: R3,5 million
• In case of a married couple, the survivor has an exemption of R7 million less so much of the exemption utilised by the first-dying
• Tax rate: 20%

Capital Gains Tax

Capital gains tax inclusion rates increase:

• Individuals: 40% (33.3%)
• Companies and trusts: 80% (66.6%)

Exclusions for individual’s increase:

• Annual exclusion: R40 000 (R30 000)
• Exclusion on death: R300 000 (unchanged)
• Primary residence: R2 000 000 (unchanged)
• Small business exclusion [assets up to R10 million]: R1 800 000 (unchanged)

VAT (unchanged)

• Rate unchanged at 14%
• Compulsory VAT registration if turnover more than R1 million per year (unchanged)

Trusts

In order to curb the avoidance of estate duty and income tax through the use of trusts, the government considers “that the assets transferred through a loan to a trust are included in the estate of the founder at death, and to categorise interest-free loans to trusts as donations. Further measures to limit the use of discretionary trusts for income-splitting and other tax benefits will also be considered“  (quoted from budget documents)

Other announcements

1. Tax rate for company unchanged at 28%
2. Tax rate for trust unchanged at 41%
3. Turnover tax for micro business unchanged
4. Tax rate for small businesses amended slightly
5. Dividend tax unchanged at 15%

Contributions to retirement funds are deductible, the deduction being limited to the greater of 27.5% of taxable income or R350 000.

Please note that this is just a summary as proposed made by the Minister and may differ from the final legislation.