From personal income tax to fuel levies, sin taxes to social grants, this year’s budget has something for everyone. This is how the 2015 budget will affect you.
Personal income tax
The announcement with the most universal effect was that personal income tax rates will be increased by 1% for all income tax brackets, except for the lowest, which will remain at 18%. People earning between R181?901 and R284?100 will now be taxed at a rate of 18% on the first R181 901 earned and at 26% on what they earn above that threshold.
Those in the next category up (a maximum of R393 200) will be taxed at a rate of 31% on the money earned above the threshold, and those earning up to R550 100 will be taxed at 36% on all income above the threshold. Those who bring in between that amount and R701 300 will be taxed at a rate of 39% on above-threshold earnings. Anyone earning more than R701?301 will now be taxed at a rate of 41%.
The South African Revenue Service’s spokesperson, Marika Muller, explained how the sliding scale works and the minimum charge per threshold. (See the table)
“South Africa’s personal income tax system is progressive, which means that the rates increase as taxable income increases. The increased rates, however, do not apply to all the income,” she said. “The increased rate only applies to the income in each tax bracket.
“An example of how the income tax brackets work is probably the best way to show what this means.
“A person with an annual salary of R200 000 will pay 18% on the first R181 900, which is R32 742. They will pay 26% on the remaining R18 100, which is R4 706. In total the tax is R37 448.”
Depending on their age, the individual may or may not then qualify for rebates.
What the tax increase means for you depends on how much you earn. According to Karen Botha, a senior manager at PwC tax, a taxpayer earning about R100 000 a year (within the lowest threshold) will now have an additional R44.25 every month.
“However, a taxpayer who earns approximately R1-million per year can expect to have R379.22 less cash to take home every month,” she said. And someone earning R1.5-million a year would be paying an extra R1 105 a month.
PwC tax consultant Ian Wilson said: “For individual taxpayers, the message is mixed: relief for low- to middle-income earners and an increased income tax burden for the middle- to high-income earners.
“The usual relief in the form of widened tax brackets and increased personal rebates has been neutralised for taxpayers with annual taxable incomes in excess of R450?000 by the increase in the tax rates by 1% for all brackets other than the lowest.”
Anton Kriel, the tax director of Grant Thornton Cape Town, said the increase could hint at greater tax hikes in the coming fiscal year.
“We are pleased that the increase in the income tax rate is only 1%, but surprised that it has been imposed across all brackets, which means that all income groups, except those earning less than R181?900, are subject to a slightly higher burden of tax,” he said. “Is the minister preparing us for a more significant increase in the top marginal rate in 2016?”
Tax for motorists
In addition to the income tax increase, motorists will see a jump in the fuel levy by 30.5c a litre as of April. The Road Accident Fund levy will be increased from R1.04 a litre to R1.54 a litre. The net result: drivers will pay an extra 80c a litre for fuel.
They are, predictably, also on the up.
• A quart of beer will soon cost you 15.5c more;
• A bottle of wine will rise by 15c;
• A bottle of sparkling wine will go up by 48c;
• A litre of spirits will be R11.69 more expensive;
• A bottle of whisky will cost R3.77 more; and
• Smokers will pay an extra 82c for a pack of 20 cigarettes.
Reprieve for small businesses
The finance minister offered relief to small businesses by increasing the threshold for company income tax. It was R150 000 a year but now includes businesses with a turnover of R335 000 or less.
Companies with a turnover of between R335 000 and R500 000 will be liable for a 1% tax on the amount above the threshold (businesses are taxed in the same way as individuals). Companies with revenue of between R500 000 and R750 000 will be liable for a 2% tax on all money above the threshold, and those with revenue of between R750 000 and R1-million will be taxed at a rate of 3%.
A temporary increase in the electricity levy has also been imposed. It will rise from 3.5c a kilowatt hour (kWh) to 5.5c/kWh.
“The additional two cents will be withdrawn when the electricity shortage is over,” the finance minister said. It amounts to an extra R10 a month for households using 500kWh of electricity.
According to a treasury official, the increase for residents is negligible. “We think it is a very small increase per user,” he said.
According to the budget review, the “rates and brackets for transfer duties on the sale of property on or after March 2015 will be adjusted to provide relief to middle-income households”.
The new rates will “eliminate transfer duty on all property acquired below R750?000, decrease effective transfer-duty liability for properties acquired up to about R2.3-million, and increase liability for properties above this amount.”
Expenditure on social grants is expected to increase at a rate of 7.3% a year over the medium term, well above inflation, which was 4.4% last quarter. Old age grants, war veterans grants, disability grants and care dependency grants will increase by R60 to R1?410 a month.
Child support grants will increase by R20 to R330 a month. Foster care grants will increase by R30 to R860 a month.
Grants take up more than 94% of the department of social development’s total budget allocation. The government projects that it will be paying social assistance grants to about 17.5-million beneficiaries by the end of 2017-2018.
Although an intergovernmental task team is still reviewing the effect of the Gauteng freeway improvement project, the minister hinted that e-tolls would remain on the cards. How these will be revised, and at what level they will be reimplemented, remains to be seen.
According to a tax consultant at the auditing firm EY, the increases, although not individually large, are likely to have a combined impact on consumers’ pockets.
“On its own, these changes may not have a huge impact, but it does make a difference when you look at all the other increases the consumer is facing,” he said.
“When you combine personal tax increases with inflation, e-tolls and fuel levies, it does have an effect on the consumer’s spending power.”