Positives, but little change to personal taxes
The budget was anticipated with much angst and crystal ball gazing, but it is relatively light on the personal tax aspects: slight changes to the tax brackets, which saw no changes in 2019, slight increases to medical credits — and very few other changes to make much mention of.
One of the more topical changes is the increase of the foreign remuneration exemption from the currently promulgated R1m to R1.25m. While this will be appreciated and welcomed, a large number of concerns and challenges still need to be resolved in the practical application of the amended legislation and the now increased exemption limit.
Another welcome increase is to the annual contribution limit for tax-free investments. This has been raised from R33,000 to R36,000 to encourage a savings culture, which is lacking in the SA economy.
Some of the more interesting proposals, however, are to be found in the various annexures to the budget documentation.
Related to the foreign remuneration exemption is a proposal by the Treasury to align some of the requirements for exchange control and tax in terms of emigration. Much media exposure, some of it not always technically accurate, has been given to the term “financial emigration” since the announcement of the changes to the foreign remuneration exemption.
The proposal seeks to create more alignment between the Reserve Bank emigration process and tax residency. While this will have very little effect from a tax perspective, as the existing residency rules would still apply, the view is that it may make the flow of funds easier for those wishing to emigrate.
Another interesting proposal relates to employer-provided bursaries. A flurry of bursary schemes were launched by various service providers to allow employees to sacrifice a portion of their salaries towards a bursary from the employer to pay school fees for their children.
The Treasury has now indicated that this was not the intention of the legislation and the loophole will be closed with effect from March 1 2020.
While this legislation has not been released yet, it will be interesting to see how this will be dealt with.
The Treasury has also announced a proposal to revise the pay as you earn (PAYE) and personal income tax system to allow for simpler filing by employers, more accurate reporting, and for taxpayers to be able to monitor their taxes throughout the year. This may result in many salaried employees not being required to file tax returns in future.
While there are very few real tax changes to comment on, there are a number of positives that can be taken from the budget and there is hope that these proposals will gain traction, particularly the comments contained in the budget regarding the rebuilding of governance at the SA Revenue Service. A working and efficient tax agency is good for SA, and a goal that all should strive and work towards.
Atkinson is chair of the Saica national tax committee and head of employees’ tax and benefits at First Rand Group.
THE PROPOSAL SEEKS TO CREATE MORE ALIGNMENT BETWEEN THE RESERVE BANK EMIGRATION PROCESS AND TAX RESIDENCY
A PROPOSAL TO REVISE THE PAYE AND PERSONAL INCOME TAX SYSTEM WILL ALLOW FOR SIMPLER FILING BY EMPLOYERS