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Note is that the budget proposals are subject to ratification by Parliament. The final legislation is expected to be tabled later this year. We will then provide you with detail information.

Personal income tax tables and graphs

The marginal rate of tax for all individuals from the second tax bracket onwards has been increased by one percentage point. The threshold for individuals who are not subject to personal income tax is increased to R73 650 of taxable income per year for those below the age of 65, R114 800 per year for those aged 65 to 74, and R128 500 for individuals aged 75 and over. The proposed tax rates for 2015/16 are set out in Annexure 1. The impacts of these proposals are set out in Annexures 2, 3 and 4.

Medical tax credits as part of PAYE: over 65 years

Employees over 65 are experiencing a decrease in their take-home pay as a result of the move to medical tax credits, although they may claim back some of these amounts on assessment after the end of the tax year. To alleviate this burden, it is proposed that medical tax credits related to medical scheme contributions be taken into account for both PAYE and provisional tax purposes.

Withdrawal from retirement annuity funds by non-residents

Non-residents who move to South Africa for a fixed term of employment often contribute to a retirement annuity fund to continue saving for retirement in a tax-efficient manner. The current definition of “retirement annuity fund” does not allow these individuals to withdraw the amounts they have saved over this fixed term if they return to their home countries. In contrast, if South Africans emigrate, they are allowed to withdraw their retirement annuity interest. The mismatch in treatment will be reviewed.

Harmonisation of the treatment of retirement funds

The taxation of contributions and the rules on compulsory annuitisation for pension funds, provident funds and retirement annuity funds will change from 1 March 2016. The level of deductible contributions will be limited to 27.5 per cent of the greater of taxable income or remuneration per year. An additional amendment will be investigated to correct an omission in 2013 that inadvertently excludes some retirement funds that enjoy the benefit of higher deductions (for example public sector funds) without being subject to the uniform annuitisation rules.

A maximum age for the preservation of retirement benefits

From 1 March 2015, a retirement fund member may defer the drawing of their retirement income until after their retirement date (if the retirement fund allows). This will provide greater flexibility for retirement fund members and encourage the preservation of retirement assets. However, to limit tax planning opportunities, it is proposed that a maximum age at which withdrawals must be taken be introduced. This is in line with other countries that have similar retirement funding arrangements.

Estate duty and retirement funds

Amendments in 2008 removed the upper age limit at which an individual was required to purchase an annuity if they had an interest in a retirement annuity fund, and excluded retirement fund benefits from the dutiable estate when a member passed away. These two amendments have made it possible for some individuals to avoid estate duty by transferring their benefits into a retirement annuity fund before their death. In the deceased’s tax calculation, lump sums paid to the estate are subject to the lump sum retirement tax table. However, lump sums equal to amounts above the allowable deduction (non-deductible contributions) are not subject to the lump sum tax table or estate duty.

To eliminate the potential to avoid estate duty, government proposes that an amount equal to the non-deductible contributions to retirement funds be included in the dutiable estate when a retirement fund member passes away.

Hedge funds

Government proposes that hedge funds be declared as collective investment schemes, subjecting them to similar rules as other collective investment schemes in terms of the Collective Investment Schemes Control Act (2002). Tax amendments will be considered to minimise any inadvertent tax consequences that may arise from the restructuring of regulated hedge funds.

Withholding tax on interest

Definition of interest: It is proposed that interest for withholding tax purposes be defined. This will ensure that there is no confusion with other definitions related to interest in the Income Tax Act.

Turnover tax regime for micro businesses

The turnover tax regime was introduced to limit the compliance burden on micro businesses with annual turnover of up to R1 million. These rules eliminate the need for a great deal of paperwork and compliance expenses. The Davis Tax Committee recommended that this incentive be made more generous to improve the participation of small businesses in the economy and the tax system. Government proposes to adjust the rates and thresholds to make the turnover tax more attractive, as shown in Annexure 5.

Transfer duties

Average house prices have recovered slowly over the past two years following a post-2009 decline. The rates for transfer duties on the sale of property on or after 1 March 2015 will be adjusted to provide relief to middle-income households. The new rates will eliminate transfer duty on all property acquired below R750 000, decrease effective transfer duty liability for properties acquired up to about R2.3 million and increase liability for properties above this amount. See Annexure 6.

Demarcation between medical schemes and health insurance

The National Treasury and the Department of Health aim to publish final regulations before June 2015 to demarcate medical schemes and health insurance products. Parameters are proposed for health insurance products to preserve the principles of social solidarity and cross-subsidisation embedded in medical schemes, while affordable medical schemes for low-income individuals are also being considered. A roadmap for implementing consumer credit insurance proposals will also be released.

Annexure 1

Personal Income Tax

2015/16

Taxable income (R)Rates of tax
0 - 181 90018% of each R1
181 901 – 284 100R32 742 + 26% of the amount above R181 900
284 101 – 393 200R59 314 + 31% of the amount above R284 100
393 201 – 550 100R93 135 + 36% of the amount above R393 200
550 101 – 701 300R149 619 + 39% of the amount above R550 100
701 301 and aboveR208 587 + 41% of the amount above R701 300

Rebates

PrimaryR 13 257
SecondaryR 7 407
TertiaryR 2 466

Tax threshold

Below age 65R 73 650
Age 65 and overR114 800
Age 75 and overR128 500

Medical tax credits

Monthly medical scheme contribution tax credits will, from 1 March 2015, be increased from R257 to R270 per month for the first two beneficiaries and from R172 to R181 per month for each additional beneficiary.

Annexure 2

Income tax payable 2015/16 (taxpayers younger than 65)

Taxable income (R)2014/15 rates (RProposed rates (R)Tax reductions (R)
85 0002 5742 043-531
90 0003 4742 943-531
100 0005 2744 743-531
120 0008 8748 343-531
150 00014 27413 743-531
200 00025 05624 191-865
250 00037 55637 191-365
300 00051 42150 986-435
400 00082 54982 326-223
500 000117 549118 326778
750 000213 247215 2972 050
1 000 000313 247317 7974 550

Annexure 3

Income tax payable 2015/16 (taxpayers 65 and older but below 74)

Taxable income (R)2014/15 rates (RProposed rates (R)Tax reductions (R)
120 0001 764936-828
150 0007 1646 336-828
200 00017 94616 784-1 162
250 00030 44629 784-662
300 00044 31143 579-732
400 00075 43974 919-520
500 000110 439110 919481
750 000206 137207 8901 753
1 000 000306 137310 3904 253

Annexure 4

Income tax payable 2015/16 (taxpayers 75 and older)

Taxable income (R)2014/15 rates (RProposed rates (R)Tax reductions (R)
150 0004 7973 870-927
200 00015 57914 318-1 261
250 00028 07927 318-761
300 00041 94441 113-831
400 00073 07272 453-619
500 000108 072108 453382
750 000203 770205 4241 654
1 000 000303 770307 9244 154

Annexure 5

Turnover Tax Regime

2015/16

Turnover (R)Rates of tax
0 – 335 0000% of taxable turnover
335 100 – 500 0001% of the amount above R335 000
500 001 – 750 000R1 650 + 2% of the amount above R500 000
750 001 – 1 000 000R6 650 + 3% of the amount above R750 000

Annexure 6

Transfer Duty Rate Adjustments

2015/16

Property value (R)Rates of tax
0 – 750 0000% of property value
750 001 – 1 250 0003% of property value above R750 000
1 250 001 – 1 750 000R15 000 + 6% of property value above R1 250 000
1 750 001 – 2 250 000R45 000 + 8% of property value above R1 750 000
2 250 001 +R85 000 + 11% of property value above R2 250 000
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