Tax highlights of 2013

The specific tax changes made in this year’s budget have been consolidated for you here.

Personal Income Tax – Tax relief for individuals

The 2013 tax proposals include personal income tax relief of R7 billion, the creation of an employment tax incentive and steps to encourage higher savings. Personal Income Tax brackets and rebates have been largely adjusted to reduce the effect of inflation on tax payable.

The amount an individual can earn before being required to pay income tax has been increased for the 2013/2014 tax year as follows:

Tax year 1 March 2013 to 28 February 2014
Below age 65 R67 111
Age 65 – 74 R104 611
Age 75 and older R117 111

The annual tax rebates for individuals have also been increased as follows:

Tax year 1 March 2012 to 28 February 2013 1 March 2013 to 28 February 2014
Primary (for all individuals) R11 440 R12 080
Secondary (age 65 – 74) R6 390 R6 750
Tertiary (age 75 and older) R2 130 R2 250

In addition, adjustments to the monetary thresholds, such as the medical tax credit, will provide relief of about R350 million.

Refined proposals on retirement reform

Individuals’ contributions to pension and retirement annuity funds are tax deductible. To promote savings, the deductibility of contributions, as well as contributions to provident funds and employer contributions that constitute fringe benefits, will be increased to 27.5% (previously 15%) of the greater of remuneration or taxable income (excluding retirement annuity or lump sum income). For equity reasons, an annual cap on deductible contributions of R350 000 will be applied.

In 2012, the National Treasury published draft reform proposals on savings and retirement. Following public consultation, proposals in the following additional areas have been developed for consideration:

  • Retirement funds will be required to transfer members’ balances into a preservation fund when they change employer – Existing rules for these funds will be relaxed to allow one withdrawal per year, although the amount of each withdrawal will be limited. Unused withdrawals may be carried forward. The transfer of pension wealth resulting from divorce settlements will also be paid into preservation funds rather than being paid in cash. Annuitisation requirements of provident and pension funds will be harmonised.
  • The tax treatment of contributions to retirement funds will be harmonised.
  • Trustees will guide members through retirement, identify a default retirement product and automatically shift members into that product when they retire, unless members request otherwise. Living annuities will be eligible for selection provided that certain standards are met. Retirement funds will be encouraged to remove any bias on members opting to retire later than the fund’s retirement age. To increase competition, providers other than registered life offices will be allowed to sell living annuities.
  • The Financial Services Board’s review of the remuneration of financial intermediaries will be strengthened.
  • A formal consultation process on these proposals will begin after the budget. The intention is to introduce legislation to Parliament during 2013. A paper addressing costs in the retirement industry will be published shortly.

Dividends Tax

In last year’s Budget speech, the Minister of Finance confirmed that Dividends Tax would be implemented on 1 April 2012 at 15%. Dividends Tax will remain at 15%.

VAT proposed on imported electronics and services

Government proposes that all foreign businesses supplying E-books, music and other electronic services to South Africans register as VAT vendors from a date to be announced. This would reduce the competitive advantage these foreign businesses have over local competitors.

Other changes

From 3 April 2013, the general fuel levy will rise by 15 cents per litre to R2.13 while the Road Accident will increase by 8 cents a litre.

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