It’s budget time again and in an effort to keep things simple, we have put together an article with some of the highlights from yesterday’s budget speech. If you are looking for all the details from Pravin Gordhan’s 2012 / 2013 budget speech, download the handy Pocket Tax Guide here.
Personal income tax:
If you are wondering if Pravin Gordhan could match the R8.1 billion in tax relief that was offered to tax payers last year, you won’t be disappointed, he’s done even better. This year the budget proposes direct personal income tax relief to individuals totalling R9.5 billion. This is in part due to millions of South Africans paying their taxes and duties on time and in full. I’m sure everyone appreciates that.
The tax threshold for individuals younger than 65 will be R63 556. If you are between 65 and 75 the tax threshold will be R99 056 and if you are older than 75, it will be R110 889.
The first tax bracket has also been increased from R150 000 to R160 000.
While there has been no proposed change in corporate tax rates there is some good news for small businesses.
Small business news:
There was positive news for small business owners when the Finance Minister revealed that the tax-free threshold would be increased to R63,556 in the coming year. The tax rate dropped from 10% percent to 7% and the threshold to which the tax rate applied would increase to R350 000. The normal tax rate of 28% still applies for taxable income over the threshold.
No relief for industry or motorists, another fuel increase is on the way. Due to an increase in the Road Accident Fund levy, eight cents will be added to the price of a litre of fuel.
Unless your tastes are limited to traditional beer, you will be disappointed as yet again anyone enjoying alcohol or cigarettes will feel the pinch. The sin tax on alcohol is going up anything from 6% to 20%.
A litre of wine will cost 18 cents more, a 340ml can of beer will cost 9 cents more while a 750ml of spirits will cost a huge R6 more. The increases aim to bring our tax rates on alcohol up to the level of other countries and on a positive note, also attempt to lower the incidences of alcohol abuse.
Smokers have not escaped and will be hit with a 58 cent increase for a packet of 20 cigarettes.
Last but not least, there will be an additional tax on gambling from April 2013 at 1% on a uniform provincial gambling tax base.
It was announced that the National Health Insurance will be phased in over a 14-year period beginning in 2012/2013. The government will look to fund this through an increase in the VAT rate, a surcharge on taxable income of individuals, a payroll tax on employers or a combination of these.
Tax evaders beware! Pravin Gordhan ensured that more focus will be given to those who are practicing tax evasion. As mentioned earlier in the article, the proposed tax relief by government was a direct result of millions of tax payers paying their tax and duties in full and on time. Therefore by doubling their efforts, we can possibly hope for further tax relief in the future.
It was also announced that South Africa will be looking at introducing a carbon tax in 2013 with the aim of reducing greenhouse gas emissions. While this is a good step forward for one of Africa’s largest polluters, it is seen as a heavy burden for many companies. With this in mind, temporary thresholds will be proposed as well as exemptions from carbon tax in order to lessen the impact on industry, especially key energy, mining and manufacturing sectors who are already feeling the pressure of increasing wage and power costs.
Government currently provides a safety net for almost one third of the population through social grants. This social grant programme pays for free services at public health facilities, no-fee schools, etc. It is predicted that the total number of South Africans receiving social grants will increase to 16.7 million over the next three years. Therefore spending on social grants will rise to R122 billion for 2014/2015 from R105 billion in 2012/2013.
Those are some of the highlights from the 2012/2103 Budget. Remember to download our pocket tax guide for all the details. If you would like advice on any matter arising from the budget speech and how it may affect your business, contact Cape Town Accountant Brett on 021 421 4444.