Finance Minister Pravin Gordhan this week announced the details of the 2017/18 National Budget, saying that it has been “an interesting 14 to 15 months since I was asked to take office in December 2015”. We took a look at what the national budget holds for you, the individual taxpayer.
A new high-income tax bracket
Roughly 103 000 South Africans were surprised with the introduction of a new high-income tax bracket in the National Budget this year, at a rate of 45% for those earning R1.5 million and more a year. This bracket alone is expected to bring in R126.9 billion in income tax revenue in the year ahead. Addressing the media ahead of his Budget Speech, the minister said a progressive tax system was crucial to achieve redistribution of wealth in South Africa. “A literal transfer of resources from a narrow base of wealthy citizens to the poor is needed to achieve social stability,” he said. Other tax brackets saw an increase of 1% in income levels, effective from 1 March 2017, while those earning incomes of R75 750 a year and less will not be liable for personal income tax. The revised personal income tax brackets for 2017/18 are as follows:
|Taxable income (R)||Rate of tax (2017/18)|
|R0 to R75 750||0|
|R75 751 to R189 880||18% of each R1|
|R189 881 to R296 540||R34 178 + 26% of the amount above R189 880|
|R296 541 to R410 460||R61 910 + 31% of the amount above R296 540|
|R410 461 to R555 600||R97 225 + 36% of the amount above R410 460|
|R555 601 to R708 310||R149 475 + 39% of the amount above R555 600|
|R708 311 to R1 500 000||R209 032 + 41% of the amount above R708 310|
|R1 500 001 and above||R533 625 + 45% of the amount above R1 500 000|
On the road
Motorists will see a hefty increase in the price of petrol come 5 April this year, with an increase of 30 cents a litre in the general fuel levy and an additional 9 cents a litre for the Road Accident Fund (RAF) levy.
At the doctor
Although medical tax credits have been increased for the 2017/18 year, the minister has indicated that you could potentially see a decrease in this subsidy going forward as the government looks at implementation of National Health Insurance (NHI).
The medical tax credits increase from R286 to R303 a month for the first two beneficiaries, and from R192 to R204 a month for the remaining beneficiaries. So, a family of four would receive a monthly medical tax credit of R1 014, up from R956 last year.
Investing your money
If you have not yet made use of the tax-free savings accounts introduced last year, the annual allowance has been increased, in line with inflation, from R30 000 to R33 000. However, the lifetime limit of R500 000 remains in place and has not been increased.
Investors will also see an increase in the dividend withholding tax, which goes up from 15% to 20%.
Growing your assets
There was a great deal of emphasis on social inequality and inclusive growth in the budget speech this year, with Minister Gordhan saying, “Economic transformation has become an urgent issue. We have too many poor people in our society and what we call the ‘missing middle’ – those earning between R70 000 and R350 000 a year, who are stuck in terms of acquiring assets and growing their wealth.”
In line with this thinking and to provide relief for lower to middle income households, purchases of property valued at R900 000 or less will not attract any transfer duty, effective from 1 March this year.
Out on the town
A night out on the town is going to cost you a little more this year, particularly if you indulge in the odd tipple and have a smoking habit to boot. The tax on ciders and alcoholic fruit beverages such as Savannah Dry and Brutal Fruit, goes up from 135 cents to 146 cents per 340ml can. If you prefer harder liquor, the tax on a 750ml bottle of spirits such as Jack Daniels whisky goes up from R52,07 to R56,50. Smokers will pay tax of R14,30 on a pack of 20 cigarettes, up from R13,24 while cigars will now be taxed at a rate of R75,86 per 23 grams, up from R69,28. Remember that tobacco manufacturers also tend to increase their prices at this time of year, so the tax increase will only form part of the total increased cost of your smokes.