By Ruth Steyn Whether you are clued up about all things financial or not, come Budget Speech time, every taxpayer needs to know how new legislation will affect them. From changes to the income tax brackets and rates, to new “sin tax” rates on alcohol and cigarettes, to the truth on how much money the government plans to spend on sectors such as Healthcare and Education – the Budget Speech contains all the details – if you have time to wade through it. Here we give you a run-down of the most important things for individuals and small businesses to know from Finance Minister Pravin Gordhan’s 2013/14 Budget Speech. High earners will be relieved to discover that the super-tax predicted by economists was not implemented – predictions saw a 45% tax rate being imposed on individuals earning over R1 million per year. In more good news for individuals, personal income tax relief of R7 billion has been promised. Excise taxes include the tax on alcohol and cigarettes, and along with the fuel levy, are taxes that directly affect your disposable income. The increases range from 5.7% to 10%, with spirits seeing the highest increase at 10%. This means that the tax on a 750ml bottle of spirits will increase by R3,60 to R39,60 per bottle. The tax paid on cigarettes is now 52% of the retail price, an increase of 60c to R10.92 per box of 20. The national gambling tax, another “sin tax”, is set to be introduced by the end of 2013. Gross gambling revenue will be taxed at 1%. April will see a 23c/l increase in the fuel levy, due to high oil prices and a weakened rand. The levy on plastic bags will also go up from 4c to 6c per bag, in an attempt to encourage shoppers to use more environmentally friendly means to get their shopping home, such as recycled or re-usable bags. The tax thresholds have been adjusted. These indicate the maximum income an individual can earn before they are required to pay tax. For individuals younger than 65, the threshold is R67,111; for 65–74 year-olds it is R104,611, and for individuals aged 75 and over, it is R117,111. The tax rebates for 2013/14 are as follows: •R12,080 for individuals younger than 65 (up by R640), •R6,750 for individuals aged 65–74 (up by R360), and •R2,250 for individuals older than 75 (up by R120) Government aims to simplify the treatment of pension, provident and retirement annuity fund contributions. Gordhan also confirmed that civil service pensions will increase by 6% as of April this year. Monthly credits for medical expenses will increase by R12 to R242 for the first two beneficiaries, and by R8 to R162 for each additional beneficiary. Government has promised to increase spending on social grants in the 2013/14 financial year, with R120 billion set aside for social grants. The old age, war veterans, care dependency and disability grants are up by R60 per month, but increases for other grants are minor: the foster care grant sees a R30 increase, and child support grants increase by only R10 to R290 per month, and by another R10 in October. Concerns about how the initial phase of the National Health Insurance system will affect taxpayers have been dismissed for the time being, but Gordhan indicated in his speech that a future tax increase will likely be needed. Small businesses can hope to see some tax relief, thanks to proposed reforms in the turnover threshold above which they must pay tax. The current threshold is R14 million, but the proposed review will see this raised to R20 million. A new tax law that may interest small and medium business owners involves a proposed youth employment incentive. Employers will pay less PAYE (Pay-as-you-earn) when employing youth. VAT on imported electronic services (such as apps and online music) has been proposed to charge tax on foreign products being sold in South Africa. This will also make South African vendors of such services more competitive. The official date of the introduction of carbon emissions tax was announced as effective from 1 January 2015. The Carbon Tax Policy will be released in March this year, which will clarify exactly how this will affect businesses. It is unlikely to impact small and medium enterprises however, with big corporations and the manufacturing industry set to be hit the hardest. Reaction to the budget has been mixed, although most experts seem to agree that Minister Gordhan was left with little room to manoeuvre. He explained that this year’s budget addresses long-term visions for South Africa’s economy, and placed strong emphasis on eradicating corruption, adopting a low-carbon economy, and improving education and expanding training opportunities. This article was supplied by online education company, GetSmarter. For more information on their portfolio of over 30 university approved online short courses for working professionals, visit www.getsmarter.co.za.
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