The Minister delivered some good news to South Africans yesterday when he announced there would be no significant tax hikes – in fact, there would be an above-inflation increase to the tax brackets which would result in taxpayers paying a bit less personal tax than they currently do. The tax brackets are often manipulated by Treasury to sneak in some ‘hidden’ taxes, but these adjustments seldom work in our favour, so this was a welcome surprise!
The announcement that the VAT rate would remain unchanged at 15% was another reason for the nation to breathe a sigh of relief.
The overriding theme of the budget was that of cutting government expenditure, rather than generating revenue –this is something we have been hoping to see for a long while. He announced a very ambitious plan to cut the public servant wage bill by R160.2 billion over the next three years, with further government savings by cutting unnecessary expenditure wastage. Cheers to that!
Let’s look at each type of tax in more detail.
Personal Tax Rates (rates below)
The personal income-tax brackets and the primary, secondary and tertiary rebates will be increased by 5.2%, which is above the expected inflation rate of 4.4%.
The tax-free threshold for taxpayers under 65 years has increased to R83 100 (previously R79 000).
Taxpayers over 65 and below 75 years of age will have their first R128 650 tax-free (previously R122 300) and those taxpayers over 75 years of age will have their first R143 850 tax-free (previously R136 750) of income.
Please click on our updated take-home pay calculator to see how these changes will impact your net salary.
| Taxable Income (R) | Rate of Tax (R) |
| 0 – 205 900 | 18% of taxable income |
| 205 901 – 321 600 | 37 062 + 26% of taxable income above 205 900 |
| 321 601 – 445 100 | 67 144 + 31% of taxable income above 321 600 |
| 445 101 – 584 200 | 105 429 + 36% of taxable income above 445 100 |
| 584 201 – 744 800 | 155 505 + 39% of taxable income above 584 200 |
| 744 801 - 1 577 300 | 218 139 + 41% of taxable income above 744 800 |
| 1 577 301 and above | 559 464 of taxable income above 1 577 300 |
Expat tax
The Minister announced an increase to the tax-free threshold for foreign remuneration earned by South African taxpayers from R1m to R1,25m. This new law, which is due to kick in 1 March 2020, has prompted many high-earners to ‘financially emigrate’ – a situation which our economy can ill-afford.
Transfer Duty
The threshold for paying transfer duties on the sale of property will increase from R900 000 to R1m.
Capital Gains Tax
There were no changes to CGT this year. Individuals still have to include 40% of the gain in their income while companies and trusts still have to include 80% of the gain into their income. The overall maximum effective tax rates for individuals remains unchanged from last year at 18% and for companies and trusts it also stays the same at 22.4% and 36% respectively.
Dividends
The Withholding Tax on Dividends remains the same at 20%.
Estate Tax and Donations Tax
Donations Tax remains unchanged – it is levied on amounts over R100 000 in total per year at 20% and at a rate of 25% on donation values exceeding R30m. Remember that donations between spouses are still tax free!
The Estate Duty threshold also stays the same - above R3.5m, and up to R30m, estates will be taxed at 20%, and then at a rate of 25% above R30m.
Interest and investment exemptions
The interest exemption thresholds stay at R23 800 for those under 65 years of age and R34 500 for those over 65.
Treasury granted some welcome relief for investors by increasing the annual contribution limit for tax-free savings accounts from R33 000 to R36 000 however; the total contribution life time limit remains capped at R500 000.
You and your first dependent will be allowed a tax credit of R319 (previously R310) and thereafter R215 (previously R209) for all other dependents.
This credit did not change from 2018 to 2019 and we were expecting the same fixed rate this year, so this increase (despite being below inflation) comes as a pleasant surprise.
Lump sum payouts and the retirement deduction
There are no changes to the lumpsum tax rates (see table below).
Similarly, the retirement laws, which allow provident funds to be deductible alongside retirement annuity and pension fund contributions, remain the same. The regime allows for a capped 27.5% of the greater of remuneration (i.e. your gross salary and benefits) or taxable income (income after deductions) to the maximum of R350 000 per year.
Retirement fund lump sum withdrawal benefits
| Taxable Income (R) | Rate of Tax (R) |
| 0 - 25 000 | 0% of taxable income |
| 25 001 - 660 000 | 18% of taxable income above 25 000 |
| 660 001 - 990 000 | 114 300 + 27% of taxable income above 660 000 |
| 990 001 and above | 203 400 + 36% of taxable income above 990 000 |
| Taxable Income (R) | Rate of Tax (R) |
| 0 - 500 000 | 0% of taxable income |
| 500 001 - 700 000 | 18% of taxable income above 500 000 |
| 700 001 - 1 050 000 | 36 000 + 27% of taxable income above 700 000 |
| 1 050 001 and above | 130 500 + 36% of taxable income above 1 050 000 |
Small Business Tax (rates below)
There’s some good news for small businesses which qualify as an SBC – they also benefit from a greater than inflationary adjustment to their tax brackets to bring their tax in line with the tax threshold for individuals.
Turnover tax rates have remained unchanged.
1) Income Tax: Small Business Corporations
| Taxable Income (R) | Rate of Tax (R) |
| 0 – 83 100 | 0% of taxable income |
| 83 101 - 365 000 | 7% of taxable income above 83 100 |
| 365 001 - 550 000 | 19 733 + 21% of taxable income above 365 000 |
| 550 001 and above | 58 583 + 28% of the amount above 550 000 |
| Taxable Income (R) | Rate of Tax (R) |
| 0 - 335 000 | 0% of taxable income |
| 335 001 - 500 000 | 1% of taxable turnover above 335 000 |
| 500 001 - 750 000 | 1 650 + 2% of taxable turnover above 500 000 |
| 750 001 and above | 6 650 + 3% of taxable turnover above 750 000 |
The minister also announced that the corporate tax rate of 28% would be lowered at some point in the future, in an effort to stimulate growth and improve economic competitiveness.
Sin Taxes
The “sinners” amongst us will be hard hit yet again. This year’s budget brings a new plan to tax ‘vapers’ at a rate of 75% of the tax rate on cigarettes.
Wine will now set you back between 14c and 23c per litre more while beer and spirits will now cost 8c and R2.89 more respectively. Cigarettes, a pet hate of government, will now cost an extra 74c per packet and cigars, a whopping extra R6.73 per 23g.
For those who enjoy a pint or three, you may want to stick to traditional African beer (sorghum), which has been spared an increase.
Fuel levy
Motorists will be forking out even more for fuel very soon. The Minister announced that fuel levies would be hiked by 25c per litre from 1 April 2020 of which 16 cents would go to the general fuel levy and 9 cents to the Road Accident Fund.
Image by Steve Buissinne from Pixabay
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