/ 23 February 2005

Manuel grants personal tax relief of R6,8bn

Minister of Finance Trevor Manuel has unveiled reductions in personal income tax totalling R6,8-billion for the 2005/06 financial year as part of the government’s 2005 Budget. This is an increase on the R4-billion in income-tax cuts granted in 2004.

Outlining Budget proposals in Parliament on Wednesday, Manuel said the reductions will benefit taxpayers across all income brackets, and take into account the revisions to the tax treatment of vehicle travel allowances that will increase the tax payable by predominantly higher-income earners.

Relief has been provided to account for inflation (so-called bracket-creep) and the minimum level at which an individual pays tax has been raised to R35 000.

The main tax relief comes through the primary rebate being raised to R6 300 from R5 800 currently, while the secondary rebate is raised to R4 500 from R3 200. The income tax threshold is also increased by 8,6% to R35 000 from R32 222 for those below the age of 65. This grants “significant” real tax relief to low-income earners, Manuel said.

The tax threshold for taxpayers aged 65 and over is raised from R50 000 to R60 000, and income-tax brackets are broadened, extending relief to all income brackets and offsetting the effect of inflation on the real tax burden.

The resulting distribution of the tax relief will see those earning from R35 000 to R60 000 granted 12% of the total relief; those earning R60 000 to R150 000 getting 32,3% of the relief; those earning R150 000 to R250 000 getting 22,4% of the relief, and those earning R250 000 and more getting 33,4% of the total relief.

Since 1996, South Africans have benefited from more than R66-billlion in personal income tax relief, primarily alleviating the tax on low-income earners.

Below is the table for personal income tax rate and bracket adjustments proposed in the 2005/06 Budget.

Taxable income (rand) — 2005/06 tax rates

0-80 000 — 18% of each R1

80 001-130 000 — R14 + 25% of the amount above R80 000

130 001-180 000 — R26 900 + 30% of the amount above R130 000

180 001-230 000 — R41 900 + 35% of the amount above R180 000

230 001-300 000 — R59 400 + 38% of the amount above R230 000

300 000 and above — R86 000 + 40% of the amount above R300 000

Previous 2004/05 income tax rates and brackets

0-74 000 — 18% of each R1

74 001-115 000 — R13 320 + 25% of the amount above R74 000

115 001-155 000 — R23 570 + 30% of the amount above R115 000

155 001-195 000 — R35 570 + 35% of the amount above R155 000

195 001-270 000 — R49 570 + 38% of the amount above R195 000

270 001 and above — R78 070 + 40% of the amount above R270 000

— I-Net Bridge