Finance Minister Pravin Gordhan delivered a safe, no real surprises budget today (Tuesday, 22 February) with R9.5 billion personal tax relief achieved by increasing the personal tax brackets.
This brings the primary annual tax rebate for individuals under the age of 65 to R11 440, for individuals aged between 65 and 75 to R6 390, and those aged 75 and older to R2 130.
A key feature of the budget is that tax revenue stabilised at about 25% of South Africa's gross domestic product (GDP). Overall revenue was slightly lower than the estimate in February last year, and the revised estimate for 2012/13 is R739 billion, which is R10 billion higher than projected last year. Also pleasing were reductions in the rates of tax on small businesses and in the compliance burden on micro businesses.
It is proposed that, from March 2014, an employer's retirement fund contributions on behalf of an employee will be regarded as a taxable fringe benefit in the hands of the employee. Individuals will be allowed to deduct up to 22.5% of the higher taxable income or employment income for contributions to pension, provident and retirement annuity funds to a maximum of R20 000 and an annual maximum of R250 000. For individuals aged 45 and over, the deductible amount is up to 27.5% with a minimum annual deduction of R20 000 and annual maximum of R300 000.
There is a major change relating to medical aid, where from 1 March 2012, the capping system will be replaced with a medical aid tax credit, bringing in equality for all taxpayers under the age of 65 and improved benefits for lower earners, a move in line with international best practice. The medical aid tax credit is R230 a month for the first two beneficiaries (including the principal member) and R154 for each additional dependent thereafter.
Comments Grant Lloyd, managing director of payroll and HR software specialist Softline Pastel Payroll, part of the Softline and Sage Group: “The medical aid tax credit system will likely result in lower earners receiving greater benefits, which is a good thing.”
He adds that the Site tax portion of PAYE will fall away, making payroll administration easier.
“Secondary Tax on Companies (STC) will be terminated on 31 March this year and a withholding tax of 15% on dividends is to be introduced on 1 April. The tax will be withheld on payment, not on declaration. South African branches of foreign resident companies are exempt from STC.”
Capital gains tax rates have effectively been increased to 13.3% for individuals, 18.6% for companies, and 26.7% for trusts, effective 1 March.
Most individual taxpayers will be affected by the introduction of a 20c levy on fuel and an 8c levy for the Road Accident Fund.
To assist SME businesses with the changes outlined in the new Budget, Softline Pastel Payroll is incorporating all of the Budget changes to tax bracket values, medical aid benefits, and tax relief rebates.
“Automated payroll and HR software ensures that payrolls are accurate and legally compliant the moment the new Budget stipulations take effect in the new tax year,” says Lloyd.
To find out how the Budget speech affects your pocket, visit www.pastelpayroll.co.za and enter your current monthly salary and allowances in the online Pastel Salary Tax Calculator.
Note to editors:
Pastel Payroll, part of Softline and The Sage Group, is one of the leading developers of payroll and HR software solutions and services in South Africa as well as the rest of the African continent. Skills, experience and innovation in this field accumulated over many years in business confirm Pastel Payroll's leading position in the SME market. Pastel Payroll & HR provides a wide range of software solutions from start-up to medium-sized as well as larger enterprises. It offers easy-to-use, feature-rich and flexible payroll and HR software solutions to ensure businesses are kept up-to-date and fully compliant with changing legislative requirements - its software does it all for you.
Web site: www.pastelpayroll.co.za
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Softline
Softline is a leading provider of business software and related services. Founded in 1988 by Ivan Epstein, Alan Osrin and Steven Cohen, Softline was established during the formative years of the business software industry. While Softline's heritage is in the SME market, the group also offers expertise and solutions that meet the needs of specific industries and larger organisations. In 2003, Softline was acquired by The Sage Group, a FTSE 100 company. Softline has a solid track record offering customers local expertise backed by the global Sage brand. The group delivers quality software solutions to make customers' business lives easier.
The Sage Group
The Sage Group is a leading global supplier of business management software and related products and services, principally for small to medium-sized enterprises. Formed in 1981, Sage was floated on the London Stock Exchange in 1989. Sage has more than six million customers and more than 13 500 employees worldwide. It operates in more than 24 countries covering the UK, Europe, North America, South Africa, Australia, India and China. For further information, please visit www.sage.com.
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