INCOME TAX, PENSION BREAKS
Gov’t pushes income tax threshold to $1.7m per annum
FINANCE AND the Public Service Minister Dr Nigel Clarke has announced a $200,000 increase in the personal income tax threshold, resulting in 24,702 additional Pay As You Earn (PAYE) taxpayers falling outside of the income tax roll.
At t he same time, t he Government announced an increase in tax exemption benefits for pensioners.
Clarke indicated that this subset of persons is part of a larger cohort of approximately 641,495 PAYE employees in addition to thousands of others who are self-employed.
Effective April 1, 2024, the annual personal income tax threshold will move from $1.5 million to $1.7 million for persons subject to PAYE or self-employed.
This means that persons earning $1.7 million per year or more will now benefit from additional tax-free earnings of an estimated $16,000 per month.
Clarke told his parliamentary colleagues that the increase in the personal income tax threshold will result in an associated revenue loss of approximately $8.9 billion for the new financial year which begins next month.
More than 2,000 pensioners will benefit from an increase in the pension exemption and age relief exemption.
At present, persons under 55 years receiving a pension from an approved statutory pension scheme or an approved superannuation scheme are entitled to a tax exemption of $80,000 restricted to the pension income only.
If the pensioner is 55 years and over, the $80,000 tax exemption can also be applied to their other sources of income. This is known as the pension exemption.
RELIEF EXEMPTION
Further, individuals 65 years and over, who are in receipt of a pension, are entitled to an age relief exemption of $80,000. This is in addition to the pension exemption enabling persons 65 years and over to be entitled to a total of $160,000 in exemptions.
Noting that the Government was moving to provide further protection to this vulnerable group, Clarke announced that the annual pension exemption and the age relief exemption will be increased from $80,000 to $250,040, respectively, effective April 1, 2024.
This will result in an additional 2,046 persons falling outside of the tax net and provide more disposable income to individuals in receipt of a pension.
The Government will give up an estimated revenue of $1.1 billion as a result of the increase in the pension exemption.
Clarke said that the Government recognises the plight of individuals receiving pension and their vulnerability to the increasing cost of goods and services, resulting from inflationary pressure.
The Government also announced an increase in the passenger duty-free threshold for personal household effects not imported for sale or commercial exchange from US$500 to US$1,000. This measure will take effect next month and will result in a revenue loss of $331 million.
Clarke pointed out that given the increase in price level within the last five years and the resulting rise in the cost of goods, the usual collection of personal and household items that persons may travel with has increased in value.
An increase in the de minimis value for imported goods from US$50 to US$100 takes effect on April 1 this year. In introducing this measure, the Government will give up $864 million in revenues.
Another measure to be introduced in the new financial year is the reduction in the corporate income tax rate from 33.3 to 25 per cent for independent power producers (IPP) producing 75 per cent or more of their energy from renewable sources.
The finance and public service minister said that the objective of the reduction in the corporate income tax rate is to promote the growth of the renewable energy sector, reduce greenhouse gas emissions, and enhance energy independence.
Estimated revenue loss associated with the reduction of the corporate income tax rate payable for IPPs producing 75 per cent or more of their energy from renewable sources is $31 million.
The Government has also made steps to further facilitate growth of the micro, small and medium-size enterprise (MSME) sector. Clarke announced that the Income Tax Act will be amended to increase the maximum participating voting share capital of companies listed on the Junior Stock Exchange from $500 million to $750 million. The increase is expected to positively impact the MSME sector as it will broaden the scope for more players to benefit from the suite of incentives afforded to these entities.