Budget speech 27 February 2013

The minster of Finance, Mr Pravin Gordan, delivered his annual budget speech on 27 February 2013. We were all waiting anxiously to hear what will the good and bad news be.

For individuals the good news was that if you earn less than R250,000 and have only worked for one employer during the year and does not earn any other sources of income, like rental income, you will no longer have to submit a tax return.

There is also indications of Tax preferred savings vehicles that will be introduced to try and motivate saving amount citizens. The Government Retail Bond have had limited success in this regard. It has however been indicated that these savings vehicles will exist in concurrence with the annual interest exemption.

There has also been increased incentives from retirement savings. From the 2014 tax year all employer contributions to employees retirement funds will be a fringe benefit. The employee will now be able to deduct up to 27.5% of taxable income per year. In previous years this was only 7.5% for pension fund contributions and 15% for Retirement Annuity contributions.

For business, more relieve was given to Small Business Corporations (SBC). To qualify as a SBC the owner may only be a member of one Closed Corporation or shareholder of one Company. The business must in effect earn 80% of its income from retail or manufacturing activity and the turnover may not be more than the increased level of R20 million. These SBC will not be taxed on the R67,111 of income and only pay 10% income tax on the rest up to R365,000. A new bracket from R365,000 to R550,000 has also been introduced where tax will be paid at 27% interest. it has also been proposed that this beneficial tax treatment will also be used for Public Benefit Organisation. The SBC tax incentive is substantial and all business owners should evaluate if it can be used by them.

The long awaited youth incentive scheme should also be introduced during this year. This will be a way for young people to gain experience and for business to be compensated for training people. These incentives will be administered through the SETA’s.

Trusts will again be looked at and we will publish an article regarding some of these changes soon.

If you need help in determining how these new budget proposals are going to impact you, please feel free to contact us.