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  • Writer's pictureLisa Perry

The Budget Speech 2015 and Financial Planning

Updated: May 2, 2023


Disclaimer: This post in no way constitutes advice. Please contact the office to set up an appointment should you wish to look at restructuring your financial position.

It came, it went but what did it really mean? By now you have heard the low down or perhaps read the 300 page budget speech, perhaps you’ve been following the comments on twitter or giggling at the cartoons on Facebook. As with every year, some of what was expected to happen happened and some things didn’t so we wait in anticipation for next year. Please find below the highlights, which are compliments of the Investec legal advisor’s presentation this morning. Further down the page, I look at what this all means from a financial planning point of view.

What was expected?

Nene is required to raise funds as per below over the next 3 years:

2015/16 = R12 Billion

2016/17 = R15 Billion

2017/18 = R17 Billion

  • VAT was expected to increase, however it was felt that this would influence the poor negatively which would be a bad political move

  • The marginal tax rate was expected to climb for the first time in 20 years at the top level to 42%

  • CGT was expected to be increased, alternatively the rebate decreased

  • A focus on the SA energy crisis was expected

  • And lastly the future of retirement reform, which by the way will still happen, it has just been “postponed” “again”

What changed?

Personal Income Tax rates:

Personal income tax 2015/2016

Taxable income (R)

Tax

0 – 181 900 18% of each

R1 181 901 – 284 100 R32 742 + 26% of amount above R181 900

284 101 – 393 200 R59 314 + 31% of amount above R284 100

393 201 – 550 100 R93 135 + 36% of amount above R393 200

550 101 – 701 300 R149 619 + 39% of amount above R550 100

701 301 & above R208 587 + 41% of amount above R701 300

Rebates

Primary R13 257 (R12 726)

Secondary (65+) R7 407 (R7 110)

Tertiary (75+) R2 466 (R2 367)

  • Effective rate of CGT

Max for individuals & special trusts – 13.65% (13.3%)

Companies – 18.65% (unchanged)

Trusts – 27.31% (26.6%)

  • Rate of tax applicable to trusts – 41%

  • Medical tax credits

R270 pm (R257) for first 2 beneficiaries

R181 pm (R172) for additional beneficiaries

Effective 1 March 2015

  • Transfer duty rate adjustment, the previous 0% tax band which was R0 – R600 000 of property value has been increased to R0 – R750 000, however a new band has been added for property values over R2 250 001 at R85 000 plus 11% of the value above the R2 250 001.

  • And then the usual, increase in sin taxes, the fuel levy and the electricity levy.

So what are we at The Wholistics Planning Group taking away from this year’s speech?

  • With the increase in maximum tax rates, there becomes a bigger need to utilize endowment contracts as to benefit from the four fund approach (which has remained unchanged), which taxes individuals at a flat rate of 30%, and the reduced CGT rate. Endowment products can also hold shares, although there are trade restrictions. Please note there are other product rules not mentioned here which will affect our decision when looking at this option.

  • R10 000 000 foreign exchange allowance. Let me repeat that R10 000 000, as the general consensus is that the local markets have had their run, investors are looking outside SA for better returns, this is a great opportunity to hold hard currency and make hay while the sun shines offshore.

  • Deferment of retirement, as of 1 March 2015 pension and provident funds will be able to allow members to defer taking their retirement after retirement date. Thus meaning that retirees will not be forced to draw an income off their retirement funds. This allows us to plan your retirement income more effectively using the benefits of retirement products 0% tax rate. There will however be a maximum date enforce at a later stage.

  • TAX FREE savings account come into effect 1 March 2015, we still await to see what the product providers have designed with this regard and how best to utilise this early Christmas present. We will keep you posted.

  • We have the good (above) now for the bad and ugly mixed together: Amendments in 2008 removed the upper age limit at which an individual was required to purchase an annuity if they had an interest in a RA, and excluded retirement fund benefits from the dutiable estate when a member passed away. These amendments have made it possible for some individuals to avoid estate duty by transferring their assets into a RA before their death. In the deceased’s tax calculation, lump sums paid to the estate are subject to the lump sum retirement taxable, however, non-deductible contributions are not subject to the lump sum tax table (or estate duty).

  • To eliminate the potential to avoid estate duty, government proposes that an amount equal to the non-deductible contributions to retirement funds be included in the dutiable estate when a retirement fund member passes away.

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