HOW THE BUD­GET AF­FECTS YOU

Neesa Mood­ley looks at how Pravin Gord­han’s bud­get speech this week the­o­ret­i­cally af­fects four read­ers

CityPress - - Business -

THE YOUNGER EARNER

Jab­u­lani is 23 years old and earns R6 170 a month, or R74 040 a year. His mother is un­em­ployed and he has two sis­ters who are younger than 18. Along with other low-in­come earn­ers, Jab­u­lani will ben­e­fit the most from the tax re­lief granted by Fi­nance Min­is­ter Pravin Gord­han this week.

This year, Jab­u­lani will be just below the tax thresh­old, which in­creased to R75 000 for those younger than 65. But it is not all good news. He spends a great deal of his money on en­ter­tain­ment and his wal­let will be sig­nif­i­cantly lighter af­ter he ab­sorbs the in­crease in sin taxes.

The good:

. As a re­sult of the tax thresh­olds in­creas­ing, Jab­u­lani’s in­come now falls below the new thresh­old and he no longer pays in­come tax.

. His mother and two younger sis­ters will ben­e­fit from the 8.1% in­crease in ex­pen­di­ture on so­cial grants ( see ta­ble). The child sup­port grant for the two girls has in­creased from R330 each to R350 each.

. The learn­er­ship tax in­cen­tive, in­tro­duced in 2002, will see Jab­u­lani re­ceiv­ing work-based train­ing that will help him im­prove his skills.

. Jab­u­lani also has hopes of start­ing his own busi­ness one day and is look­ing for­ward to an an­nounce­ment in the next few weeks re­gard­ing large cor­po­rates com­mit­ting funds and men­tor­ship ser­vices for start-up busi­nesses.

The bad:

. The in­crease of 30c/litre to the gen­eral fuel levy from April 6 is likely to push up the cost of taxi and bus fares, mak­ing Jab­u­lani’s daily work com­mute more ex­pen­sive.

The ugly:

. In­dulging his smok­ing habit of five packs a week will now cost Jab­u­lani an ex­tra R4.10 a week, or R20.50 more a month, which rep­re­sents an in­crease of 6.7%.

The tax on a 340ml can of malt beer or 340ml bot­tle of cider, or an al­co­holic fruit bev­er­age, will see an in­crease of 8.5%, cost­ing him about 11 cents more.

THE PRO­FES­SIONAL EARNER

Nandipha is a 45-year-old pro­fes­sional with two chil­dren. She has worked and stud­ied hard to de­velop her ca­reer and earns R33 000 a month, or R396 000 a year.

Though Nandipha earns a good salary as a sin­gle mum, it is get­ting harder to make ends meet each year, as education, gro­ceries, petrol and elec­tric­ity costs keep ris­ing. She will now have to pay an­nual in­come tax of R93 040. This is a de­crease from last year, when she would have been li­able for in­come tax of R94 143.

She is not sure about how the pro­posed sugar tax on soft drinks will af­fect her fam­ily, but she thinks now may be a good time to en­cour­age her chil­dren to make health­ier drink choices be­fore the new tax is im­ple­mented in April next year.

The good:

. With her teenaged son look­ing to start univer­sity in two years, Nandipha will most likely ben­e­fit from the in­cen­tive for em­ploy­ers to of­fer bur­saries to em­ploy­ees or their rel­a­tives. The in­come thresh­old for em­ploy­ees to ac­cess th­ese in­cen­tivised bur­saries has been in­creased from R250 000 to R400 000, which means Nandipha now qual­i­fies for a ben­e­fit she would not have been el­i­gi­ble for a year ago.

. For her fam­ily of three, Nandipha will re­ceive an in­crease in her med­i­cal scheme con­tri­bu­tion tax credit to R764 from R721. The med­i­cal scheme con­tri­bu­tion tax cred­its have in­creased from R270 to R286 for the first two ben­e­fi­cia­ries and from R181 to R192 for each ad­di­tional ben­e­fi­ciary there­after.

. From March 1, she will be able to claim a tax de­duc­tion of 27.5% for her con­tri­bu­tions to her com­pany’s re­tire­ment fund and her dis­cre­tionary con­tri­bu­tions to her re­tire­ment an­nu­ity, up to a max­i­mum of R350 000.

The bad:

. It will cost Nandipha, who lives in Gaut­eng, an ex­tra R15 to fill up her car from April 6 be­cause of the 30c/litre in­crease in the gen­eral fuel levy. In to­tal, Nandipha will pay R221 to govern­ment cof­fers each time she fills up with petrol. This is be­fore she pays her etolls.

. As some­one who is in­vest­ing in unit trusts for her fu­ture, she is con­cerned about the in­crease in cap­i­tal gains tax, but plans to save us­ing a tax-free sav­ings ac­count, which al­lows her to in­vest up to R30 000 a year, with her cap­i­tal gains never be­ing taxed.

The ugly:

. The tax on Nandipha’s bot­tle of Chardon­nay will cost her 59c more and a bot­tle of spir­its to make her Cos­mopoli­tan cock­tail will cost an ex­tra R3.94.

THE PEN­SIONER

Joseph has just turned 75 and has a dis­abil­ity, while his wife, Joyce, is 64 and about to re­tire.

The good:

. Be­cause Joseph has just turned 75, he ben­e­fits from the in­creased tax thresh­old of R129 850 for peo­ple 75 and older. This means he pays no tax on his first R129 850 of in­come.

. The first R34 500 of in­ter­est Joseph earns each year will not be taxed. This means he can in­vest R360 000 into RSA Retail Sav­ings Bonds, earn­ing 9% in­ter­est a year tax-free.

. Joseph’s dis­abil­ity grant has in­creased from R1 415 a month to R1 505 ( see ta­ble).

The bad:

. His weekly ex­cur­sions to stock up on gro­ceries will now cost Joseph and Joyce more, as the in­crease in the fuel levy in­creases their petrol costs.

The ugly:

. Joseph will pay an ex­tra R3.94 for his bot­tle of whiskey, and the tax on his pipe to­bacco will now cost him 7% more, with an in­crease from R3.89 per 25g to R4.16. If he wants to in­dulge in a cigar, it will cost him 6.7% more, with an in­crease in tax from R64.96 per 23g to R69.28.

THE HIGHER-IN­COME EARNER

Pa­trick earns R750 000 a year as a char­tered ac­coun­tant and lives in Sand­ton. He is mar­ried, with two chil­dren in pri­mary school, and en­joys the good life.

The good:

. Pa­trick is re­lieved to see that the max­i­mum in­come tax bracket has not been in­creased af­ter his marginal tax rate in­creased to 41% last year. Un­for­tu­nately, there was not much in this bud­get to ben­e­fit him as a higher-in­come earner, be­cause most of the tax re­lief helped those earn­ing R400 000 and less. He is now li­able for tax of R226 931 a year.

. The fam­ily re­ceives more in med­i­cal scheme con­tri­bu­tion tax cred­its, mov­ing from a tax credit of R902 to R956.

The bad:

. The car­bon tax on the lux­ury 4x4 SUV he planned to buy this year has just in­creased from R125 to R140 for ev­ery gram of emis­sions per kilo­me­tre in ex­cess of 175 grams of car­bon diox­ide/km, ef­fec­tive from April 1.

. Pa­trick is also re­con­sid­er­ing whether to trans­fer his as­sets to a trust, as there are pro­posed changes to how in­ter­est-free loans to trusts will be treated, which may re­sult in him pay­ing do­na­tions tax if he sells his as­sets to a trust us­ing an in­ter­est-free loan.

The ugly

. Pa­trick is af­fected by the changes to cap­i­tal gains tax, which means he is now li­able to pay tax on any gains from R40 000 at an in­creased rate of 16.4%, up from 13.7% pre­vi­ously. If he uses a trust, it will have to pay tax at a rate of 32.8%, up from 27.3%.

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