In my opinion, there were no major surprises or major alarm bells in this year’s budget speech, duly delivered by our esteemed Minister of Finance, Mr Pravin Gordhan. The budget has been labelled “pro-poor, but not populist” by News24, and I agree with this sentiment. What was also noticeable is that the usual references to an increased focus on trusts were not present in this speech.

The major points to take note of was the increase in the marginal income tax rate on individuals to 45%, the increase to 45% flat income tax rate on trusts, the increase of dividends tax to 20% and the increased threshold for transfer duties to R900 000 (great news for us!).

 

The budget in a nutshell:

  • VAT unchanged at 14%.
  • Individual tax brackets have changed, with the introduction of the new marginal rate of 45% (up from 41%) – refer to Table 1 below.
  • Interest exemptions for individuals at R23 800 for under 65s and R34 500 for over 65s.
  • Individual tax thresholds are:
    • Under 65: R75 750
    • Over 65:     R117 300
    • Over 75:     R131 150  
  • Trusts income tax rate increased to 45% (from 41%). The conduit principle is still in place.
  • Estate duty unchanged at 20% with the R3.5m basic deduction still allowed.
  • Dividends tax increased to 20% (from 15%).
  • Capital gains inclusion rates unchanged (percentage added to taxable income and taxed at the entity’s applicable income tax rate):
    • Natural persons:   40%
    • Companies and trusts:    80%
  • Company tax rate unchanged at 28%, with small adjustments to the Small Business Corporation tax brackets.
  • Donations tax unchanged at 20%. The difference between the official interest rate (currently 8%) and the interest rate charged to trusts will be subject to donations tax. The R100 000 annual exemption remains in place.
  • The transfer duty threshold is increased to R900 000 (from R750 000) – refer to Table 2 below.
  • Retirement fund contributions up to the maximum of 27.5% of the higher of remuneration for PAYE purposes or taxable income will be tax deductible (capped at R350 000).
  • Annual contributions to tax free savings accounts are increased to a maximum of R33 000 per annum.
  • Medical tax credits increased to R303 for the first 2 dependents and R204 per dependent thereafter.

 

TABLE 1 – INDIVIDUALS AND SPECIAL TRUSTS

  Taxable Income (R)   Rate of tax
  R 0 – R 189 880   18% of taxable income
  R 189 881 – R 296 540   34 178 + 26% of taxable income above R 189 880
  R 296 541 – R 410 460   61 910 + 31% of taxable income above R 296 540
  R 410 461 – R 555 600   97 225 + 36% of taxable income above R 410 460
  R 555 601 – R 708 310   149 475 + 39% of taxable income above R 555 600
  R 708 311 – R 1 500 000   209 032 + 41% of taxable income above R 708 310
  R 1 500 001 and above   533 625 + 45% of taxable income above R 1 500 000

 

TABLE 2 – TRANSFER DUTY RATES

  Value of property (R)   Rate of tax
  R 0 – R 900 000   0%
  R 900 001 – R 1 250 000   3% on the value above R 900 000 and up to R 1 250 000
  R 1 250 001 – R 1 750 000   R 10 500 + 6% on the value above R 1 250 000 and up to R 1 750 000
  R 1 750 001 – R 2 250 000   R 40 500 + 8% on the value above R 1 750 000 and up to R 2 250 000
  R 2 250 001 – R 10 000 000   R 80 500 + 11% on the value above R 2 250 000 and up to R 10 000 000
  R 10 000 001 and above   R 933 000 + 13% on the value above R 10 000 000

  

Source: http://www.treocmedia.com/coert-coetzee-treoc-budget_of_2017-600-609