Thanks to an unexpected increase in revenue of more than R11-billion this year, Minister of Finance Trevor Manuel again played Mr Nice Guy and cut individual taxes by a further R6,8-billion.
This bonanza is aimed at the lower-income earner, with 62,8% of the benefit going to people who earn less than R200Â 000 a year. But, with adjustments to car allowances and medical aid, the minister also gave some cash back to higher-income earners.
The amount you have to earn before paying tax has been raised from R32Â 222 to R35Â 000 a year. A person under the age of 65 earning R300Â 000 a year will pay R4Â 570 less a year.
In an effort to encourage savings in South Africa, which has one of the lowest savings rates in the world, interest income exemption will be raised from R11Â 000 to R15Â 000. This means that you can invest about R185Â 000 at 8% a year tax-free.
Manuel has eased the financial burden of pensioners. The interest income exemption for people older than 65 has been raised from R16Â 000 to R22Â 000 a year. The tax threshold before a pensioner has to pay tax has been increased from R50Â 000 to R60Â 000.
With the higher tax threshold and increased income exception for people older than 65, the minister estimates that a retired couple with income only from interest-bearing deposits, can invest about R2-million tax-free in 2005/06.