The 2011 budget leaves faces smiling and minds uncertain.
Minister Pravin Gordhan presented the 2011 budget on Wednesday afternoon and put smiles on the man in the street while leaving some taxpayers uncertain about the tax costs and benefits.
The biggest benefits from the budget includes the widening of the minimum tax bracket from R0-R140,000 in the year ending 28 February 2011 to R0-R150,000 in the year ending 29 February 2012. The result is that an additional R10,000 taxable income earned will now be taxed at the minimum of 18% marginal tax rate. In addition, the maximum taxable bracket is now increased from R552,001 and above from the 2011 year of assessment to R580,001 and above in the 2012 year of assessment.
The tax threshold, defined as the maximum amount of taxable income that will not result in a tax liability has increased as well from R57,000 (below age 65) to R59,750 and from R88,528 (age 65 and below 75) to R93,150 p.a.
One interesting feature of the budget is the introduction of the tax threshold for the taxpayers at age 75 and older. The tax age group is fairly new and did not form part of the 2010 budget. Any taxpayer at age 75 and/or older will only be liable for tax if their taxable income exceeds R104,261. This is good news as it will enable our senior citizens to earn taxable income on which they can survive without having to incur a tax liability. Previously the bracket of 65 years and above also included persons at age 75.
The primary rebate, i.e the discount on tax liability will now increase from R10,260 in 2011 year to R10,755 in the 2012 year of assessment. The secondary rebate (age 65 and below 75) will also increase from R5,675 to R6,012. A tertiary rebate is introduced for taxpayers age 75 and above at the starting amount of R2,000 per year. The tertiary rebate should alleviate pressure on our senior citizens as it is expected to increase their disposable income going forward.
The exempt portion of interest income remains a disappointing factor of each budget year on year. The exempt amount will increase from R22,300 to R22,800 for taxpayers below age 65 and from R32,000 to R33,000 for taxpayers at age 65 and above. Notably, the Minister did not introduce the exempt portion for age 75 years and above.
Some certainty has been shed on the dividend withholding tax. From April 2012 dividends will be taxed in the hands of shareholders and no longer in the hands of declaring companies. However, the declaring companies are expected to withhold 10% of dividends declared and make the payment over to SARS.
Gambling winnings will be taxed at 15% from 1 April 2010 where the winning exceeds R25,000. Payments to shareholders dressed up as dividends will now be treated as ordinary revenue and not be subject to exemption under section 10 of the Income Tax Act.
Some relief has been granted to the buyers of property on transactions from 23 February 2011. For example, no transfer duty will be payable where value of property is between R0 and R600,000, with only 3% payable between R600k and R1
A considerable amount of uncertainty has been created with regards to the national health insurance scheme funding. Amongst the options considered, are the increase in the VAT rate, a payroll tax on employers and a surcharge on individuals’ taxable income. The national health insurance scheme is to be phased in over a period of 14 years!
The fuel and Road Accident Fund Levy will increase by 18c per litre for petrol and diesel from 6 April 2011.
The total relief for individuals in the 2011 budget is R8.1bn.
Some other budget highlights include:
