Wealthy individuals to pay more tax
Personal income tax rates will be raised by one percentage point for all individuals who earn more than R181 900 a year.
This means that all individuals outside of the entry-level tax bracket will see their tax rate adjusted upwards.
“This raises tax by R21 a month for a taxpayer below age 65 with an annual income of R200 000. Those earning R500 000 would pay R271 a month more, and at R1.5 million a year the tax increase is R1 105 a month,” finance minister Nhlanhla Nene said.
“However, tax brackets, rebates and medical scheme contribution credits will be adjusted for inflation, as in previous years. The net effect is that there will be tax relief below about R450 000 a year, while those with higher incomes will pay more in tax,” he said.
All income tax brackets and rebates will increase by 4.2% (see table below).
Source: National Treasury
The move is in line with earlier signals that government wants to enhance the progressivity of the tax system – essentially suggesting that high-income earners pay more.
With corporate tax revenues under pressure amidst dwindling economic growth and significant resistance against a VAT increase from labour unions, personal income tax increases were widely expected.
Personal income tax is government’s main source of revenue and will account for 36.4% of overall tax revenue in the 2015/16 tax year, followed by VAT at 26.2% and corporate income tax at 18.7%.
The table below shows an estimate of individual taxpayers and taxable income for the 2014/15 tax year.
Source: National Treasury
Property taxes
To provide relief for middle-income households, the minister also adjusted the rates and brackets of transfer duties on the sale of property.
No transfer duty will be payable on properties below R750 000, but the rate on properties above R2.25 million will increase.
Other wealth taxes
No changes were made to capital gains tax (CGT), dividend taxes or estate duty.
National Treasury indicated that it expects the Davis Tax Committee’s reports on estate duty and wealth taxes to be published soon.
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