The bud­get and you

Some are call­ing it the Robin Hood bud­get after Fi­nance Min­is­ter Pravin Gord­han ended years of spec­u­la­tion and in­creased the top per­sonal in­come tax rate to 45% for those with a tax­able in­come of more than R1.5 mil­lion a year. But there is so much more to

CityPress - - Busi­ness -

NAME: Thandi Bulelwa JOB: Di­rec­tor EARNS: R2 mil­lion a year LIFE­STYLE: Goes on hol­i­day twice a year. Drives a Jaguar XF. FI­NANCES: In­vests money in South Africa and abroad. She has a share port­fo­lio lo­cally as well as a trust fund, but has not de­clared her off­shore hold­ings. She wants to sell her R3 mil­lion hol­i­day home in Her­manus, West­ern Cape MED­I­CAL AID: Top med­i­cal aid pack­age EN­JOYS: Drink­ing Cos­mopoli­tan cock­tails

HOW THE BUD­GET AF­FECTS THANDI

IN­COME TAX: Thandi will be af­fected by the change in the max­i­mum mar­ginal rate of tax for in­di­vid­u­als, which has in­creased from 41% to 45%. She will pay R20 000 more tax this year.

FUEL TAX: If Thandi reg­u­larly drives her car, she will be af­fected by the fuel levy in­crease of 39c per litre, in­clud­ing the 9c per litre Road Ac­ci­dent Fund por­tion, from April 5.

Au­dit­ing firm PwC says: “In ad­di­tion, it has been pro­posed that fuel be stan­dard-rated for VAT pur­poses [cur­rently, it is zero-rated], re­sult­ing in VAT of 14% be­ing in­cluded in Thandi’s fuel bill. This lat­ter pro­posal will be the sub­ject of pub­lic con­sul­ta­tion and will likely only come into ef­fect, at the ear­li­est, in the 2019 fi­nan­cial year.”

IN­VEST­MENT TAX: Due to the higher tax rate, she will pay more when she wants to sell her hol­i­day home.

“The in­crease in the max­i­mum mar­ginal tax rate to 45% means she will pay more cap­i­tal gains tax when she sells the prop­erty,” says PwC. Her trust fund will also be sub­ject to the higher tax rate. Thandi will also pay more tax on the div­i­dends earned from her share port­fo­lio as div­i­dend tax in­creased to 20%. Thandi should con­sider us­ing tax-ef­fec­tive in­vest­ment prod­ucts such as re­tire­ment an­nu­ities and tax-free sav­ings ac­counts (TFSAs).

VOL­UN­TARY DIS­CLO­SURE PRO­GRAMME: Thandi must dis­close her off­shore in­come and as­sets un­der the Spe­cial Vol­un­tary Dis­clo­sure Pro­gramme, which will no longer ap­ply after Septem­ber 1.

Mo­hammed Nas­suirio, ex­ec­u­tive fi­nan­cial plan­ner at Ned­bank Wealth, warns: “Fail­ure to do could re­sult in crim­i­nal charges be­ing laid and hefty penal­ties be­ing ap­plied.” MED­I­CAL CON­TRI­BU­TIONS: Thandi will en­joy some re­lief here. PwC says: “The cur­rent credit for prin­ci­pal mem­bers and their first de­pen­dant has in­creased from R286 to R303. The med­i­cal aid tax credit for each ad­di­tional de­pen­dant has in­creased from R192 to R204.”

SIN TAX: Thandi will pay more for her Cos­mopoli­tans as the tax on Vodka in­creased from R52.07 per bot­tle to R56.50. NAME: Harry Smith JOB: Trav­el­ling sales rep EARNS: R300 000 a year and he will re­ceive a 6% salary in­crease next month LIFE­STYLE: He’s bud­get con­scious and drives a 10-year-old Corsa FI­NAN­CIAL GOALS: He wants to buy a flat to the value of R800 000. He has a pen­sion that he con­trib­utes 10% of his salary to every month. He con­trib­utes R1 000 a month to unit trusts. MED­I­CAL AID: Hos­pi­tal plan EN­JOYS: Smok­ing, drink­ing wine

HOW THE BUD­GET AF­FECTS HARRY

IN­COME TAX: As the bud­get did not ad­just the in­come tax brack­ets to ac­com­mo­date for in­fla­tion, Harry will pay nearly R5 000 more in taxes this year, de­spite his salary in­crease only be­ing in line with in­fla­tion. His new take-home pay will only in­crease by about R1 000 a month – not enough to off­set the in­crease in the cost of liv­ing.

TRAVEL RE­LIEF: De­pend­ing on how Harry is com­pen­sated by his em­ployer for busi­ness travel, the bud­get pro­pos­als may help.

PwC says: “Harry can now be re­im­bursed up to R3.55 [pre­vi­ously R3.29] per busi­ness kilo­me­tre trav­elled with­out there be­ing any tax im­pli­ca­tions, pro­vided he does not re­ceive any other form of travel com­pen­sa­tion, and to the ex­tent that he does not claim for more than 12 000km [pre­vi­ously 8 000km] dur­ing the tax year.”

LOWER PROP­ERTY TAX: There’s more good news for him as a first-time home buyer.

Nas­suirio says: “The tax law on trans­fer du­ties of­fers re­lief to a prospec­tive prop­erty owner in that there are no trans­fer du­ties payable on the first R900 000, so it is a great in­cen­tive to own your own prop­erty as op­posed to pay­ing rent.”

HIGHER TFSA LIM­ITS: Re­gard­ing his unit trusts, if his in­vest­ment is wrapped in a tax-free sav­ings ac­count, any in­ter­est, div­i­dends or cap­i­tal gains earned on this in­vest­ment will be tax-free.

PwC says: “Harry can now con­trib­ute up to R33 000 a year [pre­vi­ously R30 000] in re­spect of a tax-free sav­ings ac­count.”

He can also in­crease his re­tire­ment con­tri­bu­tions to re­duce his in­come tax.

MED­I­CAL BEN­E­FITS: Al­though Harry has a hos­pi­tal plan, he will, like Thandi, ben­e­fit from the in­crease in the med­i­cal aid tax cred­its ap­pli­ca­ble to pri­mary mem­bers and each de­pen­dant.

SIN TAX: Smok­ing and drink­ing wine will cost Harry more as ex­cise taxes on both have in­creased. He will pay R8.76 in tax on his case of beer and R14.30 of tax for a pack of cig­a­rettes. NAME: Thuli Ng­cobo LIVES IN: Soweto, Jo­han­nes­burg JOB: Nanny EARNS: R60 000 a year LIFE­STYLE: Sup­ports her daugh­ter, who wants to at­tend Wits. Takes a taxi to work. Has a hus­band who’s un­em­ployed and dis­abled

FI­NAN­CIAL GOALS: Saves R100 a month in a sav­ings ac­count at a bank. She has loans to re­pay, so she can’t help her daugh­ter with univer­sity fees MED­I­CAL AID: No med­i­cal scheme or hos­pi­tal plan EN­JOYS: Drink­ing lo­cal beer

HOW THE BUD­GET AF­FECTS THULI

NO IN­COME TAX: As Thuli’s in­come is below the tax thresh­old, she will not be di­rectly af­fected by the changes in the tax rates.

FUEL TAXES: Al­though Thuli does not own a car, she will still be af­fected by the in­crease in the price of petrol and the fuel levy, al­beit in­di­rectly, be­cause the taxi owner could in­crease fares.

GRANT BEN­E­FIT: Be­cause her hus­band is dis­abled and not work­ing, he may qual­ify for a dis­abil­ity grant, which will in­crease by R90 a month to R1 600 a month. SAV­INGS: PwC ad­vises Thuli to save more ef­fi­ciently. “She could in­ves­ti­gate the ben­e­fits of in­vest­ing in a TFSA, where the max­i­mum an­nual limit has in­creased from R30 000 to R33 000.”

STU­DENT GRANTS: Fi­nance Min­is­ter Pravin Gord­han has an­nounced that gov­ern­ment will be al­lo­cat­ing more funds to uni­ver­si­ties as well as the Na­tional Stu­dent Fi­nan­cial Aid Scheme, which means that Thuli’s daugh­ter may be able to ap­ply for fi­nan­cial as­sis­tance for her stud­ies from the scheme.

Nas­suirio says: “The re­prieve is that if joint house­hold in­come per an­num comes to R600 000 or less, her daugh­ter would qual­ify for no fee in­creases on her tu­ition.”

FU­TURE HEALTH BEN­E­FITS: While Thuli has no med­i­cal aid or hos­pi­tal plan, gov­ern­ment is mov­ing to­wards the next phase of the im­ple­men­ta­tion of the Na­tional Health In­sur­ance (NHI) scheme.

Gord­han said it would in­clude the es­tab­lish­ment of the NHI fund and the ser­vice pack­age will be pro­gres­sively ex­panded. This could even­tu­ally mean an im­prove­ment in health ser­vices for Thuli.

NO EX­TRA SIN TAX: Un­like Thandi and Harry, Thuli will not be pay­ing more for her tip­ple of choice.

PwC says: “There has been no in­crease an­nounced in re­spect of ex­cise du­ties on lo­cal beer.”

How­ever, she will still pay R7.82 for every litre of tra­di­tional African beer.

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