Tax

TAX Highlights – 2012 /13: Budget speech 22 February 2012

The following are the main taxation implications from the Finance Minister’s speech on the 22^nd February.

1. 1. Tax thresholds:

Have increased as follows:

• < 65 years of age: R 63,556
• > 65 and < 75 years of age: R 99,056
• > 75 years of age: R 110,889

In other words, any taxable income of less than the above thresholds will result in the individual not being liable for any taxation.

1. Dividend withholding tax (DWT):

Effective 1 April 2012, at a rate of 15% of dividends declared. (Expectation was 10%).

• Replaces STC (Secondary Tax on Companies)
• Pension funds and other financial intemediatories are exempt from DWT
• Payable at end of the month after the month in which dividend was declared
• STC credit carry forward limited to 3 years from effective date

1. 3. Capital Gains Tax (CGT):

Increase in CGT by the increase in Inclusion rates, as follows:

• Individuals and special trusts: 33.3% (previously 25%)
• Legal entities and other trusts: 66.6% (previously 50%)

Other changes:

• Effective 1 March 2012
• Basic exemption increased to R 30,000 – individuals only
• Primary residence exemption increased to R 2m of gain.

1. 4. Medical credits:

Medical credits will replace medical deductions, effective from 1 March 2012.

• Credits are deducted from tax payable, while the previous scheme, medical deductions were deducted from taxable income.
• Out of pocked expenses are deductable, subject to the 7,5% threshold – no change.

1. 5. Contributions to pensions funds etc

Contributions made to Pension, Provident and Retirement funds will be tax deductable subject to the following:

• Maximum deduction is set at 22.5% and 27.5%, for natural persons aged ,45 years and >= 45 years respectively, on the higher of employment or taxable income.
• Annual deductions will be limited to R250,000 and R 300,000 as per the above age groups.
• Effective 1 March 2014

1. 6. Small Business Corporations: SBC’s

• Tax free threshold increased from R 59,750 to R 63,556.
• Taxable income up to R 350,000 (previously R 300,000) taxed at 7% (previously 10%).
• Effective for year ended on or after 1 April 2012

1. 7. Acquisitions

• Consideration being given to limiting interest deduction, to a ceiling based on EBITDA, to limit tax deductibility of excessive debt financing.

1. 8. National Health Insurance

• Scheme will be implemented in 2012/13 phased in over 10 years.
• To be funded by possibly:
  • Vat increase
  • Payroll tax on employers
  • Surcharge on taxable income of individuals

We have updated our on line tax workbook, to make input much easier – please go to our site and download this free software.

Feedback on improvement will be gratefully received.

regards

Gavin

Just received notification that the fringe benefit tax on company vehicles will be increased from 1 March 2011, to 3.5% of the value of the vehicle, which includes VAT.

Where the cost includes an element for maintenance plans, the tax rate is 3.25%.

When calculating PAYE, 80% of the fringe benefit must be included in the employee’s remuneration.

This percentage is reduced to 20% if the employer is satisfied that at least 80% of the use of the motor vehicle for the tax year will be for business purposes.