Certainly, taxpayers with taxable income in excess of R1.5 million will find themselves significantly worse off, says Barry Knoetze.
As many pundits predicted, the Minister of Finance today announced a new 45% tax bracket for individuals which will apply to taxable income in excess of R1.5 million.
The tax rates below that have remained unchanged and the income levels at which they apply have been slightly adjusted, but not enough to offset the effects of inflation.
By way of example, the impact of the tax changes at the various income levels will be as follows:
According to the Minister of Finance, the introduction of the new tax bracket will result in additional revenue for the Fiscus of R16.5 billion
These new tax rates, combined with increases in the fuel levy as well as the usual increases in “sin taxes” will hit certain sectors of the economy quite hard. Certainly, taxpayers with taxable income in excess of R1.5 million will find themselves significantly worse off.
Notwithstanding the relatively bad news regarding the new 45% tax bracket, the Minister of Finance did announce some good news for employers and employees.
For example, if an employer grants a bursary or scholarship to dependents of its employees, provided the employee’s remuneration does not exceed R600 000 (up from R400 000), then such a scholarship or bursary will be exempt from tax in the employee’s hands to the extent that it does not exceed R20 000 (up from R15 000) per dependent per year (for education below NQF7) and R40 000 (up from R60 000) per dependent per year (for education at NQF level 7 and above).
In addition to the above, the travel allowance tables have been adjusted upwards as well as the rate at which employers can reimburse employees for business travel from R3.29 to R3.55 per kilometre and for 12 000km rather than the previous 8 000km
Furthermore, the medical credit which members of medical aid funds can claim against their tax liability has increased from R286 to R303 for the first two dependents and thereafter from R192 to R204 per month per dependent.
For those employees who travel for business purposes and are paid a subsistence allowance by their employees, the deemed amounts have also increased from R372 to R397 per night away for meals and incidentals and, where the allowance is for incidentals only, the amount increases from R115 to R122.
* Barry Knoetze is Associate Director of PwC Tax Services.
** The information above has been provided courtesy of PwC Tax Services.