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 R35Â 000.
The main tax relief comes through the primary rebate being raised to R6Â 300 from R5Â 800 currently, while the secondary rebate is raised to R4Â 500 from R3Â 200. The income tax threshold is also increased by 8,6% to R35Â 000 from R32Â 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 R50Â 000 to R60Â 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 R35Â 000 to R60Â 000 granted 12% of the total relief; those earning R60Â 000 to R150Â 000 getting 32,3% of the relief; those earning R150Â 000 to R250Â 000 getting 22,4% of the relief, and those earning R250Â 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
0-80Â 000 — 18% of each R1
80Â 001-130Â 000 — R14 + 25% of the amount above R80Â 000
130Â 001-180Â 000 — R26Â 900 + 30% of the amount above R130Â 000
180Â 001-230Â 000 — R41Â 900 + 35% of the amount above R180Â 000
230Â 001-300Â 000 — R59Â 400 + 38% of the amount above R230Â 000
300Â 000 and above — R86Â 000 + 40% of the amount above R300Â 000
Previous 2004/05 income tax rates and brackets
0-74Â 000 — 18% of each R1
74Â 001-115Â 000 — R13Â 320 + 25% of the amount above R74Â 000
115Â 001-155Â 000 — R23Â 570 + 30% of the amount above R115Â 000
155Â 001-195Â 000 — R35Â 570 + 35% of the amount above R155Â 000
195Â 001-270Â 000 — R49Â 570 + 38% of the amount above R195Â 000
270Â 001 and above — R78Â 070 + 40% of the amount above R270Â 000
— I-Net Bridge