Pricewaterhousecoopers

THE 2012/13 Budget’s increasing focus on high-net-worth individuals portrays them as “abusers” of share incentive schemes and will leave them worse off after the changes proposed by Pravin Gordhan, says accounting firm PWC.

The changes included the 15 percent dividend tax, an unexpected 50 percent increase from the expected rate, capital gains made will be subject to an increased inclusion rate resulting in the increase of the effective tax rate from 10 percent to 13.3 percent for individuals, and the proposed taxation on luxury goods.

Furthermore, the annual interest exemption will be phased out to make space for tax preferred savings and investment accounts.

For those working and seeking to accumulate pensions for their retirement, the introduction of pension-capping will come as a serious blow. Although the tax deductible limit has increased to 22.5 percent, the annual tax deductible retirement contribution will be limited to R250 000 a year for individuals under the age of 45 and R300 000 a year for individuals over the age of 45. The Budget Review indicates that there is room for improvement on the compliance of high-net-worth individuals and this will be a focus area for the SA Revenue Service in the coming year. High-net-worth individuals will make a greater contribution to the fiscus, and can expect greater scrutiny and audits of their personal tax affairs.

PWC says, as announced in last year’s Budget, income tax deductions for medical scheme contributions for taxpayers below 65 years will be converted into medical tax credits. Monthly tax credits will be increased from R216 to R230 for the first two beneficiaries and from R144 to R154 for each additional beneficiary with effect from next month.