Proposed adjustment to the personal income tax schedules will provide relief of R13,6-billion to individual taxpayers, Manuel announced on Wednesday.
Tabling his 2009 Budget in the National Assembly, he said this would compensate fully for the effects of inflation and provide further relief mainly to lower and middle-income earners.
According to the Budget Review document, taxpayers with an annual taxable income below R150 000 would receive 45% of the proposed relief; those between R150 001 and R250 000, 22%; those between R250 001 and R500 000, 21%; and those with an annual taxable income above R500 000, 12%.
It was estimated that the 12,5% of registered individual taxpayers with an annual taxable income between R250 001 and R500 000 would account for 29% of personal income tax revenues, and the 5,5% of those above R500 000 would account for 38% of personal income tax revenues during 2009/10, the document said.
Manuel also announced the tax-free income threshold next year would be R54 200 for taxpayers below the age of 65 and R84 200 for those over 65, which could result in the current Standard Income Tax on Employees (SITE) system being discontinued by 2010.
On the minerals and petroleum royalties, scheduled to be implemented from May 1 this year, he said that following discussions with both labour and the mining industry and taking into account the potential impact of the economic slowdown on the industry, the mining royalties regime would be deferred from this year to 2010.
This provided a boost to the industry of about R1,8-billion, which would assist in minimising job losses, he said.
Other tax proposals included the monthly monetary caps for tax-deductible contributions to medical schemes being increased from R570 to R625 for each of the first two beneficiaries, and from R345 to R380 for each additional beneficiary, effective March 1.
Significantly, consideration is being given to replacing the current medical scheme contribution deduction with a non-refundable tax credit system.
The primary rebate for taxpayers will rise to R9 756 from R8 280, while the secondary rebate will increase to R5 400 from R5 040.
The tax-free interest-income ceiling would be increased from R19 000 to R21 000 for those below the age 65 and from R27 500 to R30 000 for those aged 65 and above. The Treasury described these adjustments as ”in line with government’s goal of encouraging greater national savings”.
It was also proposed to increase the tax-free income ceilings for foreign dividends and interest from R3 200 to R3 500, and the annual exclusion ceiling for capital gains and losses for individuals from R16 000 to R17 500.
Capital gains tax (CGT) would be modified so that no CGT was payable on a primary residence up to a gross value of R2-million.
On the subject of traveling allowances, the Treasury proposed that the claiming of ”deemed business kilometres” be scrapped from 2010/11. Taxpayers required to use their personal vehicles for business purposes will still be able to claim business traveling expenses by keeping a logbook.
For taxpayers over the age of 65, the provisional tax threshold for people only receiving employment income, interest, rents and dividends will be upped
to R120 000 from the current R80 000. — Sapa and I-Net Bridge