TAX Highlights – 2012 /13: Budget speech 22 February 2012
The following are the main taxation implications from the Finance Minister’s speech on the 22nd February.
- 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.
- 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
- 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%)
- Effective 1 March 2012
- Basic exemption increased to R 30,000 – individuals only
- Primary residence exemption increased to R 2m of gain.
- 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.
- 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
- 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
- 7. Acquisitions
- Consideration being given to limiting interest deduction, to a ceiling based on EBITDA, to limit tax deductibility of excessive debt financing.
- 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