Finance Minister Tito Mboweni stepped up to the lectern with his Aloe Ferox plant in hand today, to deliver to the nation the annual Budget Speech, setting out the government’s plan for its finances for the year ahead.
“The Aloe Ferox survives and thrives when times are tough. It actually prefers less water. It wins even when it seems the odds are against it,” stated Mboweni, clearly referring to South Africa’s ability to come out of the hard times better than before. Time will tell whether that to be true, but there were clear indications that the Finance Minister is looking to cut the State’s wage bill. He confirmed his proposal to cut the wage bill by R160.2 billion over the next three years. No doubt this will cause huge uproar with the unions, and COSATU have already expressed their anger at this decision, shortly after the Budget Speech was delivered.
Stating that the economy is only expected to grow by 0.9% this year, he spoke about the need for the country to have stable supply of electricity and that that is their number one task, stating that government will “do whatever it take” to ensure this.
Good news was the announcement that there will be no increases to Income Tax and that the public will be getting some relief in this regard. While some analysts thought we may see another VAT hike, that didn’t materialize as the Minister rubbished those claims.
Furthermore there was a renewed focus on the youth and education, with investment into new schools, adding robotics and coding to the maths, science and technology grant for grades R to 3 and plans to do a feasibility study for the establishment of a new university in Science and Innovation in Ekurhuleni
In terms of the property sector, there was some great news as the threshold for Transfer Duty has been increased to R1 million rand, up from the previous R900 000, making purchases a bit more within reach for first time buyers. No changes in the rates for Capital Gains Tax or Withholding Tax (for Non Residents disposing of immoveable property).
Overall there were no major surprises in this years budget and we hope that the Minister has done enough to stave off a ratings downgrade by Moody’s, whose announcement is expected towards the end of march.
Below is a summary of the main Tax rates for the year ahead:
INCOME TAX: INDIVIDUALS & TAX
Individuals & Special Trusts
|Taxable Income (R)||Rate of Tax (R)|
|0 – 205 900||18% of taxable income|
|205 901 – 321 600||37 062 + 26% of taxable income above 205 900|
|321 601 – 445 100||67 144 + 31% of taxable income above 321 600|
|445 101 – 584 200||105 429 + 36% of taxable income above 445 100|
|584 201 – 744 800||155 505 + 39% of taxable income above 584 200|
|744 801 – 1 577 300||218 139 + 41% of taxable income above 744 800|
|1 577 301 and above||559 464 + 45% of taxable income above 1 577 300|
Trusts other than Special Trusts
|Rate of 45%|
INCOME TAX: COMPANIES, SMALL BUSINESS CORPORATIONS & MICRO BUSINESSES
|Type||Rate of Tax (R)|
|Companies||28% of taxable income|
Small Business Corporations
|Taxable Income (R)||Rate of Tax (R)|
|0 – 83 100||0% of taxable income|
|83 101 – 365 000||7% of taxable income above 83 100|
|365 001 – 550 000||19 733 + 21% of taxable income above 365 000|
|550 001 and above||58 583 + 28% of taxable income above 550 000|
|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|
|500 001 – 750 000||1 650 + 2% of taxable turnover above 500 000|
|750 001 and above||6 650 + 3% of taxable turnover above 750 000|
CAPITAL GAINS TAX
Capital Gains on the disposal of assets are included in taxable income.
|Maximum Effective Rate of Tax|
|Individuals & Special Trusts||18%|
Events that trigger a disposal include a sale, donation, exchange, loss, death or emigration. The following are some of the specific exclusions:
- R2 million gain or loss on the disposal of a primary residence;
- Most personal use assets;
- Retirement benefits;
- Payments in respect of original long-term insurance policies;
- Annual exclusion of R40 000 capital gain or capital loss is granted to Individuals and Special Trusts;
- Small business exclusion of capital gains of R1.8 million for individuals (at least 55 years of age), when a small business with a market value not exceeding R10 million is disposed of, and
- Instead of the annual exclusion, the exclusion granted to individuals is R300 000 for the year of death.
A final tax at a rate of 15% is imposed on interest from a South African source payable to Non Residents. Interest is exempt if payable by any sphere of the South African Government, a bank, or if the debt is listed on a recognized exchange.
Disposal of Immovable Property
A provisional tax is withheld on behalf of Non Resident sellers of immovable property in South Africa, to be set off against the normal tax liability of the Non Resident.
|Type||Rate of Tax|
|Non Resident Individual||7.5%|
|Non Resident Company||10%|
|Non Resident Trust||15%|
Transfer Duty is payable at the rates below on all transactions which are not subject to VAT.
|Value of Property (R)||Rate|
|0 – 1 000 000||0%|
|1 000 001 – 1 375 000||3% of the value above 1 000 000|
|1 375 001 – 1 925 000||11 250 + 6% of the value above 1 375 000|
|1 925 001 – 2 475 000||44 250 + 8% of the value above 1 925 000|
|2 475 001 – 11 000 000||88 250 + 11% of the value above 2 475 000|
|11 000 001 and above||1 026 000 + 13% of the value above 11 000 000|
For further information and a more detailed breakdown of the Budget you can visit the SARS website.