Yesterday afternoon Finance Minister Malusi Gigaba delivered what is largely regarded as a fair budget given South Africa’s difficult fiscal environment.
Most notable were a couple of key changes to this year’s budget that will have a direct impact on investments, including those in the property sector:
- VAT will increase from 14% to 15% on 1 April 2018.
- Estate duty will increase from 20% to 25% on the dutiable portion of estates of more than R30 million.
- Slight adjustments to individual income tax rates.
- Tax on trusts and companies remain the same as the previous year.
Value-Added Tax (VAT)
Higher income earners will be affected by the increased VAT rate the most, as 85% of VAT revenue comes from the wealthiest 30% of households.
While certain supplies are subject to a zero rate (exempt from VAT) – in an effort to help to support the poor – from the beginning of April this year, VAT will be levied at the standard rate of 15%. This rate will apply to the provision of goods and services by VAT registered vendors. (Vendors making taxable supplies or providing services to the value of more than R1 million per year must register for VAT. Vendors making more than R50 000 but not more than R1 million per year may apply for voluntary registration.)
Estate Duty is a tax payable on property of local residents (and South African property of non-residents) minus the allowable deductions, whose net estate is in excess of R3.5 million. From April, the tax is levied on the dutiable value of an estate at a rate of 20% on the first R30 million and at a rate of 25% above R30 million.
Individuals and trusts tax rates for 2018/19
The income tax rates for natural persons and special trusts (year of assessment ending 28 February 2019) are as follows in the tables below.
|Taxable income (R)||Taxable rates 2018/19||Taxable rates 2017/18|
|0 – 195 850||18% of each R1||Unchanged|
|195 851 – 305 850||R35 253 + 26% of the amount above R195 850||R34 178 + 26% of the amount above R189 880|
|305 851 – 423 300||R63 853 + 31% of the amount above R305 850||R61 910 + 31% of the amount above R296 540|
|423 301 – 555 600||R100 263 + 36% of the amount above R423 300||R97 225 + 36% of the amount above R410 460|
|555 601 – 708 310||R147 891 + 39% of the amount above R555 600||R149 475 + 39% of the amount above R555 600|
|708 311 – 1 500 000||R207 448 + 41% of the amount above R708 310||R209 032 + 41% of the amount above R708 310|
|1 500 001 and above||R532 041 + 45% of the amount above R1 500 000||R533 625 + 45% of the amount above R1 500 000|
In an effort to support the lower-income earners, the threshold, above which Personal Income Tax (PIT) is paid, as well as tax rebates were both raised, for different age brackets, as follows:
|Below 65 years of age||78 150||75 750|
|Aged 65 and below 75||121 000||117 300|
|Aged 75 and over||135 300||131 150|
|Primary – all natural persons||R14 067||R13 634|
|Secondary – persons aged 65 and below 75||R7 713||R7 479|
|Secondary – persons aged 75 above||R2 574||R2 493|
The tax rate on trusts (other than special trusts which are taxed at rates applicable to individuals) is 45%.
Now is the time to protect your investments
The good news is that the rate at which companies and trusts are taxed remains unchanged at 28% and 45% respectively. From the point of view of the structuring of investments, using companies and trusts is vital to help protect and grow your wealth, particularly in the current economy. These vehicles will help your investments to be as tax efficient as possible.
Should you wish to talk to one of our attorneys or accountants regarding the budget changes and how these will affect you, or one of our trust specialists about creating the necessary structures in which to invest in property, please contact one of our national IGrow Wealth Investments offices, either by emailing email@example.com or by calling:
Cape Town – 021 979 2501
Pretoria – 012 943 0201
Durban – 031 110 0817