Belinda Beresford
Sometimes it may seem that the government and taxpayers – not to mention accountants and lawyers – are all locked in a contest with the one side trying to avoid as much tax as possible and the other trying to collect it.
For many people having a tax adviser is part of life – whether simply to pay someone else to handle the paperwork or as part of a tax structuring plan.
But with the government determined to apply the maxim “from each according to his means” to taxation, it comes as no surprise that the budget has seen further chipping away at fringe benefits. The ultimate aim is to ensure that the tax you pay has minimal relation to the structure of your pay package.
In his budget speech, Minister of Finance Trevor Manuel said tax avoidance discriminated against lower-paid workers who tended to have less choice in the structure of their salary, and eroded the tax base.
Many of the changes to fringe benefits had been anticipated, given the published recommendations of the Katz commission which is looking at South Africa’s tax structures. Although the result may be higher liabilities for many taxpayers, commentators said some of the new measures were less onerous than had been anticipated.
From the beginning of April, you’ll pay taxes on half (instead of 40%) of any travel allowance you get from your employer for using your own car on business. However, this will probably not affect your overall tax liability since you can claim the tax back at the end of the year if you can prove your business mileage.
But, you are likely to face an increase in taxable income if your employer has been paying all or most of your medical aid contributions. From April, any such payments which exceed two-thirds of overall contributions will be taxed as a fringe benefit.
The government had been considering applying taxes once employer contributions passed the 50% mark, but fears of discouraging lower paid workers from medical aid schemes contributed to a more lenient stance.
You should also look at the structure of your salary package if your employer provides fringe benefits in the form of residential accommodation, although the government has given you an extra year’s grace.
The budget review says discussions with stakeholders meant that last year’s proposals to tax such benefits have been relieved slightly since the tax proposals could have “unintended effects on certain lower-income groups”. As a result, changes to tax on accommodation will only take effect from the beginning of March next year.
Manuel also announced plans to clamp down on the use of trusts to reduce tax liabilities, with further measures expected in the future. Unless a trust has been established for a disabled or mentally handicapped person, income vested in the trust itself will be taxed at 35% on income up to R100 000 and 45% above this level.
In addition, beneficiaries of trusts will in future not be able to take advantage of losses within trusts for tax reasons. Previously, individuals and companies had been able to claim tax deductions on such losses.
Benefit schemes will also be affected by the budget. Among the changes, contributions to friendly societies – such as some stokvels – are going to cease to be tax deductible from the beginning of March next year.