If Finance Minister Tito Mboweni announces significant changes to individual taxes during his budget speech today, it could have wide-ranging implications for South Africa’s heavily burdened tax base. Here’s how it will affect you
There are numerous actions which the minister could take to bolster the state’s coffers, including a possible VAT increase, and an increase in personal income tax and capital gains tax.
It’s uncertain whether another increase would be implemented but if it is it would mean an almost immediate increase in the cost of living which will impact any household’s financial plan. Currently the continuum of income tax ranges from 18% at the lower end to 45% and R532 041 of taxable income at the upper end.
To neutralise the effect of personal tax increases one must maximise on tax deductions, for instance contributions to retirement funds.Currently the taxpayer enjoys generous tax relief for contributions to a retirement fund, and since retirement is a definite goal in our journey through life, the full amount invested in a tax-free growth portfolio, will be of personal benefit one day.
Increasing the current 40% inclusion rate will pay lip service to the original intent and will be a serious factor to consider. To date very few recommendations were incorporated, save for the curbing of the use of trust for estate duty saving purposes and an increase in the estate duty rate.It will be interesting to see if some of the other recommendations will be considered, for example the estate duty relief for spousal bequest.Whatever the minister announces on Wednesday, South Africans will be impacted in some shape or form.
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