South Africans were promised R7 billion in tax relief in the 2013 National Budget, but will we actually see an increase in our take-home pay? With government spending high and the economy slow, South African Revenue Service is under pressure to collect taxes, while the government is being forced to cut spending and reduce fraud and corruption – does this situation bode well for you and I, the average tax payer?
South Africa’s sovereign rating had decreased over the past few months due to fears that Government will spend beyond its means. The budget deficit continued to grow as economic growth weakened and there is now more pressure on government to cut spending; stay within its budget; allocate funds more effectively; eradicate fraud and grow the economy. And government is looking at treasury to help “save the day”.
As a tax payer, you may be wondering whether you will experience any relief over the next year. While tax payers who received increases that were lower than the 5% may end up with a little more disposable income each month, most tax payers will find themselves bumped into a higher tax bracket as the tax bands have been increased by inflation.
The taxation rate for the “super wealthy” which is set at 45% was not imposed this year, simply because 3.3 million South Africans pay 99% of personal tax
Some Tax Highlights From The Budget
Here are several new taxation measures that were announced by the government in the 2013 budget:
- Tax credits for medical expenses have increased.
- The threshold for submitting a tax return has increased to R250 000. If you earn less than this from a single employer, you don’t need to submit a tax return.
- An employment tax incentive for businesses employing young workers and those that operate in special economic zones (SEZs).
- Fuel levies will increase in April
- An automatic tax clearance system will be introduced within the next year
- Small business concessions
Taxation on Trusts
Reforming the taxation of trusts were also mentioned in the budget, in particular:
“To curtail tax avoidance associated with trusts, government is proposing several legislative measures during 2013/14. Certain aspects of local and offshore trusts have long been a problem for global tax enforcement due to their flexibility and flow-through nature. Also of concern is the use of trusts to avoid estate duty, which will be reviewed.”
“The proposals will not apply to trusts established to attend to the legitimate needs of minor children and people with disabilities. The proposals are as follows:
Discretionary trusts should no longer act as flow-through vehicles. Taxable income and loss (including capital gains and losses) should be fully calculated at trust level with distributions acting as deductible payments to the extent of current taxable income. Beneficiaries will be eligible to receive tax-free distributions, except where they give rise to deductible payments (which will be included as ordinary revenue).”
If you currently have a trust, I would suggest that you meet with me this year to ensure that you are complying with these new regulations.