Finance Minister, Mr Tito Mboweni, presented his latest budget speech on 24 February 2021.
Focusing on the tax aspects of the budget speech, Treasury anticipated that tax collections in 2020/21 are expected to be approximately R213 billion less than the 2020 Budget expectations. This shortfall is the largest on record and with the current South African economy combined with the prolonging effect of Covid-19, great concern built up in anticipation of the speech. However, the Budget was more optimistic than expected and tax increases were kept to a minimum.
The relevant taxes that may affect investors during the 2021/2022 financial year are outlined below and we continue to advise clients to contact their Autus Wealth Adviser should they wish to discuss the impact of the latest tax changes on their financial plans. Regularly re-balancing your investment portfolio is key to a successful investment strategy. It is important to consider if your portfolio is aligned with your objectives in every stage of life. Tax-planning is an integral part of re-balancing your financial plan.
Personal Income Tax
An above-inflation increase of 5% has been made to the personal income tax brackets with the highest marginal tax rate for individual taxpayers remaining unchanged at 45% The 2021/2022 personal income tax rates are tabled below.
Other than special trusts, the rate of tax remains at 45% while the corporate income tax rate will be lowered to 27% for companies with years of assessment commencing on or after 1 April 2022. Local dividends tax, foreign dividends and rental remain at a flat rate of 20%.
Carbon Fuel Levy Taking effect on 7 April 2021, an inflation-linked general fuel levy increase of 15 cents per litre for petrol and diesel, and an above-inflation increase of 11 cents per litre in the Road Accident Fund levy, will be implemented. The carbon tax rate will increase by 1c to 8c per litre for petrol, and 9c per litre for diesel, on the same date.
Retirement lump sum taxation Both the Retirement Fund Lump Sum Withdrawal Benefits and the Retirement Fund Lump Sum Retirement Benefits or Severance benefits remain unchanged.
- Tax on lump sum benefits pre-retirement and at retirement remains unchanged. The first R500 000 of retirement lump sum withdrawal remains taxed at 0%. The first R25 000 of a pre-retirement lump sum withdrawal is taxed at 0%.
- Tax Harmonisation of Retirement Fund Contributions has a cap of R350 000 and a tax deduction formula of 27,5% per annum of the greater of taxable income and remuneration applies to members of all retirement funds, including provident funds
Estate duty The rate of estate duty and donations tax remains at 20% for dutiable estate amounts of R30 million or less and increases to 25% for dutiable estate amounts over R30 million. The estate duty abatement (exempt threshold) remains at R3.5 million per person and a surviving spouse may also benefit automatically from any unused deduction in the death of the first spouse’s estate, i.e. The abatement remains a combined maximum R7 million for the second deceased spouse.
Donations tax Deduction in respect of donations given to certain public benefit organisations are limited to 10% of taxable income and are exempt from donation tax. Donations tax is levied at a flat rate of 20% if the cumulative value of property donated that does not exceed R30 million and is calculated at a rate of 25% on the cumulative value exceeding R30 million. The first R100 000 donated in each tax year by a natural person remains exempt from donations tax. Foreign exchange
The offshore investment allowance remains at R10 million per person per calendar year. The R1 million individual single discretionary allowance remains unchanged. Capital gains tax (CGT) The primary residence tax exclusion from capital gains or loss remains at R2 million. The annual capital gain exclusion for individuals remains at R40 000. The effective rate of CGT is the range of 7.2% to 18% for individuals, 22,4% for companies and 36% for Trusts, although correctly structured Trusts can result in the individual rate.
To access the detailed budget speech in full, please follow the link below:
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