2015 BUDGET SPEECH – HIGHLIGHTS
In his first National Budget speech, Finance Minister Nhlanhla Nene stated that it was a challenging budget to prepare, under difficult circumstances, including electricity supply challenges and a weaker economic environment. As stated by Minister Nene, “The 2015 Budget tax proposals aim to increase tax revenues, limit the erosion of the corporate tax base, increase incentives for small businesses, and promote a greener economy”.
He went on to state that the main tax instruments that will be adjusted to generate additional revenues for 2015/2016, are personal income taxes and fuel levies. The marginal personal income tax rate will be increased by one percentage point for all taxpayers earning more than R181 900, and tax brackets and rebates adjusted to account for fiscal drag. This will also include a one percentage point increase in the tax rate for trusts.
Some of the other tax proposals outlined in the budget were as follows:
- Raise the general fuel levy by 30.5 c/litre. The Road Accident Fund levy will also increase by 50 c/litre, bringing the total fuel levy increases to 80.5 c/litre.
- Take further steps to combat base erosion and profit shifting.
- Provide a more generous turnover-tax regime for small businesses. Businesses with a turnover below R335 000 a year will pay no tax, and the maximum rate is reduced from 6 per cent to 3 per cent.
- Increase excise duties on alcohol and tobacco products.
- Review the diesel refund scheme.
- Strengthen the energy-efficiency savings initiative.
- Raise the electricity levy.
- Change transfer duty rates and brackets to provide relief for middle income households.
- Despite a recommendation that VAT be increased to 15 per cent, it has remained the same at 14 per cent.
- There were no changes to estate duty, donations tax or Securities Transfer Tax provisions.
Note that these are proposals as per the budget speech, many of which are yet to be implemented. We will keep you posted on further developments. Feel free to contact our offices with any queries.
HOW WILL THE 2015 BUDGET AFFECT MY PERSONAL TAXES?
Finance Minister Nene stated in his budget speech that personal income tax remains a buoyant source of revenue, and that the tax policy aims to raise revenue in a manner that is fair and efficient. The budget proposals therefore aim to increase tax revenues in order to bridge the gap between revenue requirements and projected tax proceeds. Included in these proposals are some changes to personal income tax, including adjustments to tax brackets and rebates.
The budget proposes an increase in marginal tax rates for individuals earning more than R181 900, by one percentage point, and an increase in medical tax credits.
The effect is as follows:
- A 1% increase for all taxpayers earning more than R181 900 annually. This means those earning a minimum of R15,158.30 average monthly salary will be affected
- A taxpayer below age 65 with an annual income of R200 000 will pay R21 a monthmore tax
- A taxpayer earning R500 000 annually will pay R271 a month more tax
- A taxpayer earning R1.5 million a year, will pay R1 105 more per month
The overall effect is that there will be tax relief below R450 000 a year, while those with higher incomes will pay more in tax. Taxpayers will also feel the effects on their pockets due to:
- The increase in the fuel levy from 1 April 2015
- The proposed electricity levy increases, to encourage power saving
Pay packets will change from 1 April 2015, in that government proposes a temporary reduction in the monthly UIF contribution threshold from the current R14 872 to R1 000. This would be applicable for the 2015/2016 year only. Overall, taxpayers will see the effect of the proposals on their monthly earnings from 1 April 2015, except for those in the lowest tax bracket.
TRANSFER DUTY – IMPACT ON PROPERTY SALES
The 2015 budget proposals provide that rates and brackets for transfer duties on the sale of property will be adjusted to provide relief to middle-income households. From the 1 March 2015, transfer duty will be eliminated on properties below R750 000. In addition, there will be a decrease on transfer duty for properties acquired up to around R2.25 million while, the rate on properties above R2.25 million will increase.
This applies to any person, including companies, close corporations or trusts. As from 1 March 2015, transfer duty is payable at the following rates on transactions which are not subject to VAT.
Acquisition of property by all persons:
In effect, this means that a property purchased for R1.5 million before 1 March 2015 will cost the purchaser R37 000 in transfer duty. After the proposed changes, the transfer duty would be R30 000. All properties purchased for R750 000 or less will be exempt from transfer duty (as opposed to the previous R600 00 threshold). However, a property purchased for R10 million which previously cost the purchaser R717 000 in transfer duty, will, after the proposed changes, incur a R937,500 transfer duty fee. The proposed changes therefore, are positively geared towards the middle to lower income group, yet will negatively affect those purchasers who buy properties for R2.25 million or more.
MODERNISING CAPITAL FLOW MANAGEMENT
In the recent budget review it was stated that rules and conditions continue to be modernised to attract investment and enable South African organisations to expand internationally, particularly into Africa. To this end the exchange control manual is being simplified and will be completed in 2015.
The following threshold changes will take effect from 1 April 2015:
- Authorised dealers may process corporate investment up to R1 billion per year, from R500 million previously, as well as the carrying forward of any unused allowance.
- South African residents’ foreign capital allowance will increase from R4 million to R10 million per calendar year or upon emigration, or R20 million per family unit.
- The subcategories under the individual single discretionary allowance are removed and the annual R1 million allowances may be used for any legal purpose abroad.
- The dispensation for credit card usage, currently limited to individuals, will be extended to corporates.
These dispensations will be subject to the statutory requirements of the Reserve Bank and the South African Revenue Service. We will update you once further administrative details have been communicated by the Reserve Bank.