CAPE TOWN – Given the worsening economic realities still facing the Minister of Finance this year, it came as a pleasant surprise that he provided 5.2 percent adjustments to the individual tax brackets and rebates, resulting in real personal income tax relief for the already stretched individual taxpayers.
Finance Minister Tito Mboweni on Wednesday took heed of South Africa’s call for tax relief and announced no major tax increases when delivering his 2020 National Budget Policy Statement. Mboweni said this was in a bid to support growth and further stated that there was some real personal income tax relief.
“This Budget means that a teacher who earns on average R460 000 a year, will see their taxes reduced by nearly R3 400 a year. Hard-working taxpayers, who earn on average R265 000 a year, will see their income tax reduced by over R1 500 a year.
“Our income tax system is progressive, and the adjustments reflect this. Someone earning R10 000 a month will pay 10 per cent less in tax. Someone earning R100 000 a month will pay about 1.5 percent less,” said the minister.
Associate director at PwC Barry Knoetze said the net result was that, with effect from March 1 2020, the maximum rate of 45 percent applied to taxable income in excess of R1 577 301, from R1 500 000, while the lowest rate of 18 percent applied to taxable income up to R205 900, from R198 850, with similar adjustments to the brackets in between.
“There will also be 5.2 percent increases in the primary, secondary and tertiary rebates, resulting in the tax-free threshold increasing from R79 000 to R83 100 for taxpayers under 65 years of age.
“It was widely expected that the medical tax credit available to taxpayers who are members of medical aid schemes would not be increased, however, it has in fact been increased nominally from R310 to R319 per month for each of the first 2 dependents and from R209 to R215 per month for every subsequent dependent,” said Knoetze.
As regards the much talked about taxing of foreign remuneration that comes into effect on March 1, Knoetze said the proposed exemption would be increased from R1 million to R1.25 million.
The Minister also announced a comprehensive review of the pay-as-you-earn system with a view to implementing a more modern automated process.
Senior manager at PwC Tax Technical Greg Smith said a welcome announcement in the Budget was that the legal framework and administration of pay-as-you-earn would be reviewed with a view to implementing a more modern, automated process.
“This is likely to be of benefit both to employers and employers by simplifying the administrative burden of the employees' tax system,” he said.
Mboweni also proposed broadening the corporate income tax base to source additional revenue that would be used to reduce the corporate tax rate in the near future to help South African businesses grow.