Every year the finance minister announces tax relief for individuals; however, when you dig a bit deeper you realise that each year middle- to higher-income earners get a little poorer.
If you earn R300 000 or more you will see tax relief of 3% or less, which means that if in March your salary increase is in line with inflation, you will end up paying more in tax while your purchasing power falls.
Filling up your tank will cost you 18c more once you have paid your fuel levy and road accident fund. This will put further pressure on motorists who are expected to absorb a 40c per litre petrol hike next month as well. That means next month a 50-litre tank of petrol will cost you an extra R29. We won’t even go into the toll road charges that are creating an outcry in Gauteng.
There has also been a major announcement on retirement funds — that aims to level the playing field between pensions, retirement annuities and provident fund — which allows employees to increase their tax-free contributions to 22,5%. This is a great opportunity for people closer to retirement and who find themselves underfunded to use this tax benefit to boost their savings. However, we will need to keep abreast of proposed changes to provident funds that could see withdrawals on lump sums on retirement limited to one-third. The Treasury is also mooting proposals to introduce mandatory preservation when changing jobs.
The good:
- Tax-free interest income increased to R22 800 for people under 65 and R33 000 for people over 65.
The bad:
- Smokers will pay 80c more a pack, while drinkers will pay 13,5c more for a bottle of wine, 6,4 cents more for a 340ml can of beer, or R2,86 more for a bottle of vodka R2.86.
To watch:
- In March 2012 the tax deduction of medical contributions will convert to a tax credit. In other words, employees will receive a tax credit rather than a tax deduction. This allows for an equal benefit to all taxpayers regardless of income.