A quick summary of some of the major points from finance minister Pravin Gordhan’s 2016 budget speech.
No increases to personal income tax or VAT this year but Minister Gordhan is looking for R15bn in new taxes next year and another R15bn the following year. Reading between the lines of the Budget Review, VAT appears to be a serious consideration but who knows whether government has the political will to implement.
While there were no implicit income tax increases, fiscal drag will put R7.6bn into the pockets of the Receiver of Revenue this year. Basically anyone earning more than R400 000 per annum had very little tax adjustment for inflation so although the take-home pay will not be less in nominal terms, you will be able to buy less than you did last year.
Capital gains tax remains an easy target and the inclusion rate is increased from 33.3% to 40% although the first R40 000 is now exempt (up from R30 000). That means you pay CGT at your marginal tax rate on 40% of your capital gain that exceeds R40 000. For individuals at the maximum 41% tax rate that equates to 16.2% CGT. So if you were thinking of selling any assets in the next few months, do so before 1 March 2016. This also makes Tax-Free Savings Accounts more attractive.
Through the fuel levy, sin taxes and so-called environmental taxes, government will raise an additional R9.5bn this year.
Fuel levy is up by another 30c – so now R4.28 per litre of petrol goes to government. This includes the Road Accident Fund.
One of the new environmental taxes is a tyre levy of R2.30/kg on new, used or retreaded tyres that are imported.
Offshore tax net
Those with offshore assets that have not yet been declared have been given a six-month window of opportunity to do so. Applications for the Special Voluntary Disclosure Programme will commence on 1 October 2016 and continue to March 2017. Given the common reporting standards that will allow governments across the globe to share financial information on individuals and require advisers to disclose undisclosed assets, I suggest you take advantage of this opportunity.
If you plan on buying a property over the value of R10 million, your transfer duty costs will increase from 11% to 13% ‒ so around R937 500 on a R10 million home.
The tax credits for medical scheme contributions will increase but just by inflation from R270 to R286 per first two beneficiaries and from R181 to R192 for additional beneficiaries. For a family of four that represents R956 in tax credits.
Fewer than 1 million income-tax payers (13% of registered taxpayers) account for 64% of tax revenue. Of the R441bn expected to be collected through personal income tax in 2016/17, nearly 36% (R157bn) will come from the 3.2% of registered taxpayers who earn R1 million per annum or more.