Finance Minister Tito Mboweni. File Photo: IOL
ONE DISAPPOINTING aspect of Wednesday’s Budget is that did not highlight any significant attempts to encourage savings, says Denver Keswell, senior legal adviser at Nedgroup Investments.

“Disappointingly, there was no mention of any increases to the limits on tax-free investments or incentives to promote retirement fund savings, which seems mismatched to the president’s approach to growth and savings. Another interesting observation is the absence of any notable attempts to further introduce wealth taxes,” he says.

Keswell highlights four take-outs from the National Treasury’s Budget Review document that affect South African investors and planners:

1. Refining the foreign employment income tax exemption for South African residents. From March 1, 2020, South Africa residents who spend more than 183 days in employment outside the country, will be taxed on foreign employment income of more than R1million. “This is an important point for any South Africans working abroad to keep in mind when planning their finances in the medium to long term,” says Keswell.

2. Reviewing the tax treatment of surviving-spouse pensions. Treasury has recognised the hardships caused for surviving spouses, who are often liable for tax on income in their personal capacity, as well as any spousal pension received. Often, this can push the surviving spouse into a new tax bracket. “To address this, Treasury is aiming to introduce a flat rate on spousal income, which should make the system fairer. However, the exact mechanism through which this will be achieved is yet to be clarified so we will watch developments closely here,” Keswell says.

3. Exemption relating to annuities from a provident or provident preservation fund. It has been proposed that non-deductible provident fund contributions can be used against income received. “Currently, any non-deductible contributions for members of retirement funds are tax-exempt against any lump sum or income derived from the retirement fund, so this proposal is aimed at extending the exemption to members of provident funds. We welcome this development for members of provident funds who choose to take an income,” says Keswell.

4. Taxation of collective investment schemes. The previously suggested taxation of collective investment schemes (which include unit trust funds and exchange traded funds) has been reviewed and will be reconsidered. “Following feedback from industry based on last year’s proposals, Treasury has acknowledged industry’s concerns that introducing the taxation of collective investment schemes, as previously proposed, would cause more hardship than positives,” says Keswell.

“After reviewing the comments, the government has proposed that they will need to work with the industry. This is encouraging for the financial industry, indicating that the taxation will be introduced in a constructive and collaborative way.” Nedgroup Investments

PERSONAL FINANCE