2015 TAX IMPLICATIONS FROM THE BUDGET SPEECH

Back in February the minister announced that R25bn would be saved in expenditure over the next two years, but R16.8bn is to be raised this year via tax increases and a remarkably large rise in the fuel and road accident fund levies. To be honest, we expected greater tax increases from the minister, thankfully he spared us some of the pain!

R1.35 trillion will be spent in the 2015/2016 year with education getting the biggest slice of the pie at R265.7bn – Let’s hope the continued spend in educating the youth can be translated in jobs once they leave school. A welcome increase in money for Health Services is good to see. Social Service expenditure increased as well, whilst being important, should be tackled head on by aims to decrease unemployment. We look forward to more from the minister on efforts there.

The minister reaffirmed the intention to follow the National Development Plan, however whether this is achievable remains to be seen. The minister spoke of opening up the economy to attract investment, curbing waste and dedicating resources to those in need and infrastructure development. Growth in the short term showed very limited improvement and keeps being revised downwards in each budget or policy statement. One has to ask the question whether the minister’s targets for government debt and spending more than we earn each year are achievable. However we remain optimistic that South Africa can flourish given the right mix of economic policy.

What was excellent to see was the amount of allocated resources for school children via free meals worth R18bn, textbooks and better studying conditions which is really needed. Once again though the announcements for small and medium enterprises were lacking in real substance and does not inspire for growth in this sector. We would have hoped to see some radical announcements, but perhaps the minister of Small Business will touch on more of that in her departmental budget speech. Overall the minister did come out strongly against waste, assured the country that the economy was on sound footing and did his level best not to cause pain to taxpayers. He should be commended for his dedication to trying set the country on the right path.

How does this all affect the average taxpayer?

Personal Income Tax

Individuals across the country, those qualifying above the new tax threshold of R73 650 (previously R70 700) will be paying increased taxes of R8.25bn (previously R9.25bn relief) for the next tax year. Taxpayers earning below R200 000 per annum will generally not suffer any increases however those earning R200 000 will be paying R21 a month more. The biggest suffers will be those earners over R450 000 per annum who will suffer the real brunt of the increase. The usual “fiscal drag bracket creep” which takes into account inflation caused all brackets to go up by 4.2% on average however with inflation being slightly higher, we actually are looking at a greater tax increase overall given the 1% increase in all but the lowest tax bracket. It does mean though that those earning less than R6 371.50 (previously R5 891.67) will not be paying any tax.

Interest and investment exemptions

There have been no changes to the interest exemption thresholds staying at R23 800 for those under 65 years of age and R34 500 for those over 65. New Investments Savings Schemes will allow for tax free investments which means no Dividends Tax, no CGT and no Income Tax for investments capped at R500 000 over a lifetime with an annual limit of R30 000. More to follow about this in a later blog as it is not as good as it seems.

Medical Tax Credits

You and your first dependent will be allowed a tax credit of R270 (previously R257) and thereafter R181 (previously R172) for all other dependents. This increase is seemingly in keeping with the minister’s inflation linked adjustments. Furthermore a new credit system replaces the old deduction system.

Lump sum pay-outs

No changes on the taxable rates of lump sums, however income protection pay-outs will no longer be subject to tax as INCOME PROTECTION contributions are no longer deductible for tax purposes.

Small Business Tax 

Last year we heard the minister announce that a commission was looking into the small business tax regime and how best to improve it in order to achieve better growth in this sector. Unfortunately the minister’s announcements on a “better Turnover Tax regime” and more officials in SARS branches does little for those businesses trying to grow and are hampered by low VAT threshold and income tax rates. Unfortunately very disappointed here.

Sin Taxes

Those “sinners” amongst us might actually be grateful to the minister as some of these taxes will actually decrease in the new year, however it is the increase in fuel levies which should really impact taxpayers. Wine will now set you back a further 15c (previously 36c) per litre while beer and spirits will now cost 15.5c (previously 9c) and R3.77(previously R4.80) more respectively. Ciggies, a pet hate of government, will now cost you an extra 82c (previously 68c) per packet.

For the first time in quite a while, due to lower petrol prices, the minister has reduced the reimbursive amount of R3.18 (previously R3.30) for those travelling for work. Road accident fund and fuel levies have gone up too meaning an increase in 80.5c (previously 20c) per litre from 1 April. At least the good news is no VAT increases and significant increases in Social Grants which really help those most in need.


 

TAX BIO-BOXABOUT MARC SEVITZ

Marc Sevitz is the co-founder and director of Tax-Tim, an online digital tax assistant platform that simplifies your understanding of tax related issues and completes your tax returns for you. Marc has a BCom and Post Graduate Diploma in Financial Accounting and Tax Law from the University of Cape Town. He has worked for various companies within the Financial Services sector.

 

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