Finance Minister Pravin Gordhan delivered a safe, no real surprises budget today (Wednesday 27 February) with R7 billion personal tax relief, being 2.5 billion less than in the previous tax year 2012/13.
Personal income tax brackets and rebates have been slightly adjusted to reduce the effect of inflation on tax payable. The amount an individual can earn before being required to pay income tax has been increased for the 2013/14 tax year to R67 111 for individuals below the age of 65, R104 611 for individuals between the ages of 65 and 74 and R117 111 for individuals over 75 years.
The annual tax rebates for individuals have been increased. The primary annual tax rebate for individuals under the age of 65 to R12 080, for individuals aged between 65 and 75 to R6 750 and those aged 75 and older to R2 250.
The lowest tax bracket remains at a tax rate of 18% (annual taxable income up to R165 600) and the highest tax bracket remains taxable at 40% (annual taxable income of more than R638 600).
Effective from 1 March 2012 the medical aid capping system was replaced with a 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 system is also used in the new tax year, commencing 01 March 2013.
Monthly tax credits for medical scheme contributions (reduction of tax payable) will be increased from R230 to R242 for each of the first two beneficiaries on a medical scheme and from R154 to R162 for each additional beneficiary on the medical scheme for the 2013/14 tax year.
“The medical aid tax credit system will likely result in lower earners receiving greater benefits, which is a good thing,” comments Philip Meyer, technology director of payroll and HR software specialist Sage Pastel Payroll & HR.
One of the biggest changes were for individuals whose taxable income is from one employer and is below R250 000 a year. They are not required to submit income tax returns, however they will still be liable to pay income tax. Previously, this annual earnings limit was R120 000. For example, if an individual earns a gross salary of R20 000 per month (no entitlement to commissions or bonuses), they no longer have to file their tax returns.
This means that there will be more pressure on employers to ensure that tax deductions and calculations on payslips are accurate.
Another big proposed change in the Budget Speech effective from March 2014 is that an employer’s contribution to retirement funds on behalf of an employee will be treated as a taxable fringe benefit in the hands of the employee. Individuals will from that date be allowed to deduct up to 27.5 per cent of the higher of taxable income or employment income for contributions to pension, provident and retirement annuity funds with a maximum annual deduction of R350 000.
Contributions above the cap are carried forward to future tax years. Therefore, all company contributions towards pension, provident and retirement annuity funds will become a fringe benefit and it will increase the total tax deduction. If the company contribution is low, it will only have a small impact on the individual. However, if the company contribution towards pension, provident and retirement annuity funds is substantial, it will have a bigger effect on the individual’s net pay and because the taxable earnings are greater, the individual will have to pay more tax.
Environmental taxes go up and will affect a large portion of the RSA population.
From 3 April 2013, the general fuel levy will rise by 15 cents per litre to R2.13 while the Road Accident Fund levy will increase by 8 cents per litre to 96 cents per litre of petrol.
Plastic bag levy – The levy on plastic shopping bags has encouraged consumers to reduce their use. The levy will rise from 4 cents to 6 cents per bag from 1 April 2013.
Incandescent light bulb levy – To promote energy efficiency a levy on incandescent light bulbs was introduced in 2009. The levy is to be increased from R3 to R4 per bulb from 1 April 2013.
Motor vehicle carbon dioxide emissions tax – The tax on motor vehicle carbon dioxide emissions, which is intended to encourage consumers to buy vehicles with lower carbon emissions, will increase from 1 April 2013. For passenger cars, the tax will rise from R75 to R90 for every gram of emissions per kilometre above 120 gCO2/km. In the case of double cabs it will increase from R100 to R125 for every gram of emissions per kilometre above 175 gCO2/km.
Following overseas trends, a policy paper on carbon emissions tax is to be published in 2013 with the view of introducing a carbon tax from 2015.
Subsistence allowances paid to employees who travel for business within South Africa, will be tax-free provided the amount paid for meals and incidental costs does not exceed R319 per day. An amount not exceeding R98 per day for incidental costs only will also be exempt.
To assist SME businesses with the changes outlined in the new Budget, Sage Pastel Payroll & HR 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. Currently there are 75 tax certificate totals that need to be considered when producing payslips, therefore manually doing the calculations is a daunting task and errors can creep in easily,” says Meyer.
To find out how the Budget Speech affects your pocket, go to www.pastelpayroll.co.za and enter your current monthly salary and allowances in the free online Sage Pastel Payroll & HR Salary Tax Calculator.
SARS has recently changed the reference number for third party agent appointments from ITA88 to AA88. This change is already available in the latest [email protected] Version 6.2.2. SARS has also updated the guidelines for agent appointments. Go to www.sars.gov.za to view the new Agent Appointment Process and Employer Guide.
John Doe who is 37 years old is employed on a full-time basis. During the 2012/2013 tax year of assessment, John earned a salary of R18,000 per month and a travel allowance of R3,000 per month. During December 2012 John also received a bonus of R15,000 and a taxable bursary of R3,000. John contributes monthly to a Pension fund to the value of R500, a medical aid of R2,300 and he has a deduction towards an income replacement policy of R100 each month. John is the main member on his medical aid, and has two other beneficiaries loaded on the medical aid. Below, please find the tax comparison for John for 2012/2013 vs. 2013/2014 tax year.
John will enjoy a tax saving of R1,696.
|Calculation||2012/2013 Tax Year||2013/2014 Tax Year|
|B||Add Travel Allowance Taxable Portion||R3,000 * 80% = R2,400||R3,000 * 80% = R2,400|
|C||Subtract Pension Fund||R500||R500|
|D||Subtract Income Replacement Policy||R100||R100|
|E||Annual Regular Income [A+(B*80%)-C-D] *12||R237,600||R237,600|
|F||Add to Annual Earnings Bonus||R15,000||R15,000|
|G||Add to Annual Earnings Bursary||R3,000||R3,000|
|H||Total Annual Earnings [A+(B*80%)-C-D] * 12 + [F + G]||R255,600||R255,600|
|I||Tax per table||R52,980 [((I-R250,000)*30%)+R51,300]||R52,308 [((I-R165,600)*25%)+R29,808]|
|K||Less Medical Aid Tax Credits Per Beneficiaries||R7,368 [(R230+R230+R154)*12]||R7,752 [(R242+R242+R162)*12]|
|L||Tax Payable By Employee Per Year [I-J-K]||R34,172||R32,476|
|M||Example of Tax Payable Per Month [L/12]||R2,847.67||R2,706.33|
Nifty Budget Speech Quick Links:
- Budget Speech Support Tools, view the tools.
- Full Budget Speech Transcript, view here.
- View the new 2013/14 Tax Rates (tax tables), click here.
- Book your seat for the Budget Speech changes Seminar, book now.
- Free online Salary Tax Calculator, use now.
- Try the Free Salary Tax Calculator on your smartphone. Go to m.taxcalc.pastelpayroll.co.za
- Free Online Logbook, click here.