South Africans were bracing themselves for bad news when Finance Minister Enoch Godongwana delivered his budget speech yesterday. However, in line with expectations during an election year, he delivered the reassuring news that there would be no significant tax hikes, no VAT increase, and no introduction of a new wealth tax. Contrary to earlier speculation, the medical tax rebate is also set to stay for a while longer.
However, this positive news is not without consequences. As South Africa's government debt burden hits its most dangerous level since 1947, it has resorted to allocate R150 billion from its profits on its foreign exchange holdings (called the 'Gold and Foreign Exchange Contingency Reserve Account') for the first time in twenty years. The government will use these funds over the next three years to help lower its dangerous debt burden.
Let’s look at each type of tax in more detail.
Personal Tax Rates – no inflation adjustment to brackets
Although personal income taxes have not been hiked, the tax brackets have not been adjusted for the effects of inflation. This means that if you receive an inflation related increase this year, you'll pay higher taxes due to ‘bracket creep’. The tax brackets are often manipulated by the Treasury to sneak in some ‘hidden’ taxes, which are not always that obvious at first glance.
The tax-free threshold for taxpayers under 65 years will remain at R95 750 per year. Taxpayers over 65 and below 75 years of age will have their first R148 217 tax-free and those taxpayers over 75 years of age will have their first R165 689 tax-free. These thresholds all remain the same as last year.
Please click on our updated take-home pay calculator to see your salary for the new tax year.
|
Taxable Income (R) |
Rate of Tax (R) |
|
1 – 237 100 |
18% of taxable income |
|
237 101 – 370 500 |
42 678 + 26% of taxable income above 237 100 |
|
370 501 – 512 800 |
77 362 + 31% of taxable income above 370 500 |
|
512 801 – 673 000 |
121 475 + 36% of taxable income above 512 800 |
|
673 001 – 857 900 |
179 147 + 39% of taxable income above 673 000 |
|
857 901 - 1 817 000 |
251 258 + 41% of taxable income above 857 900 |
|
1 817 001 and above |
644 489 + 45% of taxable income above 1 817 000 |
Good-bye to Solar PV tax incentive for households
Individuals who installed rooftop solar panels at their homes from 1 March 2023 to 28 February 2024 are able to claim a rebate of 25% of the cost of the panels, up to a maximum of R15 000. This rebate was only intended for 2024 and the government has not extended it.
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 in their income. The overall maximum effective tax rates for individuals remain unchanged from last year at 18% and for companies and trusts it is 21,6% (previously 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 R 23 800 for those under 65 years of age and R 34 500 for those over 65 and older.
The annual contribution limit for tax-free savings accounts remains unchanged at R 36 000 with the total contribution lifetime limit capped at R 500 000.
Medical Tax Credit – no inflation adjustment
Similar to the tax brackets, the medical tax credits have also not been adjusted for inflation. You and your first dependent will continue to be allowed a tax credit of R 364 (same as last year) and thereafter R 246 (also the same) for all other dependents.
Lump sum payouts and the retirement deduction
The retirement tax tables for lump sums withdrawn before retirement, and for lump sums withdrawn at retirement remain the same as last year. The once-off tax-free amount of R 550 000 that can be withdrawn at retirement remains the same as last year.
The retirement laws, which allow for the deductibility of provident, pension and retirement annuity 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.
In September 2024, the new ‘two-pot retirement system’ comes into effect which will give retirees more flexibility with regards to accessing their retirement savings earlier. More details on this to follow.
Retirement fund lump sum withdrawal benefits
|
Taxable Income (R) |
Rate of Tax (R) |
|
0 - 27 500 |
0% of taxable income |
|
27 501 - 726 000 |
18% of taxable income above 27 500 |
|
726 001 - 1 089 000 |
125 730 + 27% of taxable income above 726 000 |
|
1 089 001 and above |
223 740 + 36% of taxable income above 1 089 000 |
Retirement fund lump sum benefits or severance benefits
|
Taxable Income (R) |
Rate of Tax (R) |
|
0 - 550 000 |
0% of taxable income |
|
550 001 - 770 000 |
18% of taxable income above 550 000 |
|
770 001 - 1 155 000 |
39 600 + 27% of taxable income above 770 000 |
|
1 155 001 and above |
143 550 + 36% of taxable income above 1 155 000 |
Sin Taxes
Smokers and drinkers will have to dig deeper into their pockets to feed their habit.
A can of malt beer or cider will set you back an extra 14c per can, wine an extra 47c per bottle, and spirits, a whopping R 5.13 per bottle. Smokers will have to cough up an extra 97c per packet and an extra R 9.41 per 23 grams of rolled cigars!
Fuel levy
A little bit of good news is that the general fuel levy and Road Accident Fund (RAF) levy will remain unchanged for the new tax year.
Small Business Tax
There is no inflationary adjustment to tax brackets and therefore the rates remain the same as last year.
1) Income Tax: Small Business Corporations
|
Taxable Income (R) |
Rate of Tax (R) |
|
1 – 95 750 |
0% of taxable income |
|
95 751 - 365 000 |
7% of taxable income above 95 750 |
|
365 001 - 550 000 |
18 848 + 21% of taxable income above 365 000 |
|
550 001 and above |
57 698 + 27% of the amount above 550 000 |
2) Turnover Tax for Micro Businesses
Turnover tax rates have remained unchanged.
|
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 |
Corporate Tax
Having recently been reduced from 28% to 27%, the corporate tax rate will remain at 27% for the year ahead.
New tax break for electric vehicle makers
To encourage the production of electric vehicles, the minister announced a tax break to be implemented from 1 March 2026. Producers will be able to claim 150% of their qualifying investment spend on electric and hydrogen-powered vehicles in the first year of investment and this incentive will be in place for ten years.
Business’s renewable energy incentives to remain
Businesses can continue to benefit from the renewable energy incentive allowing them to claim a tax deduction equal to 125% of their investment. This incentive, expanded last year from 100% to 125%, is set to remain in effect until February 28, 2025.
15% minimum tax for global multi-nationals
South Africa, in line with other countries, is implementing a minimum tax for global multi-national companies. This move is targeted at companies that shift their profits and related tax liability to countries with lower tax rates. However, starting in January 2024, any multi-national making more than €750 million per year, will have to pay a 15% corporate tax in South Africa, regardless of where their profits are located.
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