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Budget 2017: What you need to know

Significant announcements from the 2017 speech.

Significant announcements

  • New 45% tax rate for those earning more than R1.5 million per annum (around 100 000 taxpayers are affected)
  • Dividend withholding tax increased from 15% to 20%
  • No increases in VAT or Capital Gains Tax
  • No new allocation for nuclear
  • Budget deficit to decline from 3.4% in 2016/17 to 3.1% in 2017/18.
  • For the first time since 2010, tax revenue growth did not match economic growth

Tax changes

  • Government will raise an additional R28 billion during the new tax year
  • New 45% marginal tax rate for those earning more than R1.5 million per annum
  • Other taxpayers will not receive full relief from fiscal drag – the impact of inflation on tax brackets
  • Tax on dividends increase from 15% to 20%
  • Taxes on fuel to rise by 39c a litre. (Fuel levy +30c and RAF levy +9c)
    • Total fuel levy on petrol will amount to 36% of pump price
    • Total fuel levy on diesel will amount 40.2% of pump price
  • Properties sold for less than R900 000 will not pay estate duties (2016: from R750 000)
  • Sugar tax: Will be implemented once parliament passes legislation
  • Carbon tax: Revised legislation will be published mid-2017 for public consultation
  • Zero-rating of VAT on fuel to be removed from 2018/19 financial year

Sin taxes

  • Duties on malt beer rises by 9% or 12c to R1.47 per 340ml can
  • Duty on unfortified wine rises by 8.8% or 30c to R3.61 per liter
  • Duty on fortified wine rises by 6.1% or 35c to R6.17 per liter
  • Duty on sparkling wine rises by 8.8% or 93c to R11.46 per liter
  • Duties on ciders and alcoholic fruit beverages rise by 9% or 12c to R1.47 per 340ml can
  • Duty on spirits rises by 8.5% or R4.43 to R56.50 per 750ml bottle
  • Duty on cigarettes rise by 8% or R1.06 to R14.30 a packet of 20s
  • Duty on cigars rise by 9.5% or R6.58 to R75.86 per 23g

Economic projections

Indicator

2016/17

2017/18

2018/19

2019/20

GDP growth

0.5%

1.3%

2%

2.2%

Total GDP

R4.3 trillion

R4.66 trillion

R5.03 trillion

R5.44 trillion

CPI

7.2%

6.4%

5.9%

5.8%

 

Fiscal framework

 

2016/17

2017/18

2018/19

2019/20

Total Revenue

R1.3 trillion

R1.41 trillion

R1.54 trillion

R1.67 trillion

Total expenditure

R1.45 trillion

R1.56 trillion

R1.68 trillion

R1.81 trillion

Budget deficit

-R148 billion

-R149 billion

-R142 billion

-R146 billion

Total debt

R2 trillion

R2.2 trillion

R2.44 trillion

R2.67 trillion

Debt as % of GDP

45.5%

47%

47.6%

48.1%

Debt service costs

R146 billion

R162 billion

R181 billion

R197 billion

 

Average monthly social grant values

   

Rand

2016/17

2017/18

Percentage

State old age

 R1 505

 R1 600

6.3%

State old age, over 75

 R1 525

 R1 620

6.2%

War veterans

 R1 525

 R1 620

6.2%

Disability

 R1 505

 R1 600

6.3%

Foster care

 R890

 R920

3.4%

Care dependency

 R1 505

 R1 600

6.3%

Child support

 R355

 R380

7.0%

To read Pravin Gordhan’s full budget speech, please click here.

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When do these new changes take effect specifically the new estate duty threshold?

My eye fell on the Foster Care R920 vs Child Support R380. Is there truth in the theory that this encourages mothers to have more children and let them grow up with their grandparents or family. Does not seem like a great incentive to have smaller better off families from a financially/education point of view.

Quite right! All these grants encourage women to have more children. There is also evidence that some mothers drink heavily during pregnancy so that their offspring are born with foetal alcohol syndrome. Then they get an additional grant. Already the world’s total population exceeds the scientifically calculated maximum by nearly 2 billion. No wonder we find famine increasing.

My domestic also got a grant for having HIV and for nerves.

Quite correct when I was still farming, my wife asked our domestic why her daughter was on the farm and not at school. She was in Std 9 in those days. The answer?? she is old enough to have children so must get pregnant for the money.

Vomit. Dividends tax is double tax.

The shareholder has already paid tax on the income that he earned to enable him/her to invest in the company. I own a part of a company and I therefore own a part of it’s assets including cash; all I do is either leave the money in the company or take it out as decided by the board of directors.

Just htf is it remotely ethical to charge me even R0.01 for taking dividends. To take 20% is simply theft.

The is PGs biggest flop by far, simply a capitulation to the socialist cancer.

and that sir is why the brightest and best of us have moved to ozland where there is NO double tax on company dividends. in fact we are given “credits” for notional tax paid by the dividend paying company. known as dividend imputation (only oz, NZ, Chile and Malta have it) this has been huge in the retirement area where retirements entities (self managed superannuation funds) can receive massive tax refunds. https://en.wikipedia.org/wiki/Dividend_imputation

Economical with the truth ?

Under imputation systems (and Australia is no exception) dividends, grossed up for a notional tax credit, are taxable at the marginal rate. So there is indeed double tax on dividends if the individual’s marginal rate exceeds the rate of tax credit. So for top-rate taxpayers :

Dividend in SA 700, tax at 20% is 140
Dividend in Australia 700, plus imputed tax 300 = 1000 ; taxed at 45% = 450, less tax credit 300 is 150

Can we deduce from this that your income is less than A$ 37000 ?

@cheetah58 – please read before commenting- “this has been huge in the retirement area”. retirement entities -if in pension mode (ie paying a pension) have a NIL Tax rate!!!!!!!!and therefore get all their imputed credits back!!!

@robertinsydney

In South Africa retirement funds are exempt institutions and no dividends tax is deducted at source. I assume that this would also qualify as “huge” in your parlance.

Hi, Robert. Can you please contact me. Permanent residency approved. Need some advice.

Your general statement remains untrue, and the special case of superannuation funds is off-topic.

Whether the zero tax rate in retirement phase (soon to be capped) adequately compensates for the taxation of funds in accumulation phase is a complex question, but I see no reason to trumpet the Australian setup as superior.

Remember he was guided by Zuma. Even thanked him for his input.

So 17 million social grant recipients get an increase equal to inflation. Meanwhile taxpayers – all 6 million of us and falling – won’t get a full inflation adjustment and 100,000 will see a 5% decrease in their net income. Completely unsustainable.

I didn’t pick up the VAT on fuel detail. That’s an additional R1.80 a litre in a year’s time ? Eek.

What I did pick up was the dark hint about the future of the medical expenses rebate. The logical conclusion to this is that, as NHI is more fully developed, the medical expenses rebate will be eliminated over time, making medical aid (even more) unaffordable for the middle class and forcing them into the state system.

Did not see that either until now. I suppose it will encourage the taxi industry to become compliant which would be regressive as a tax.

I was surprised that no one seemed to be making tax rates comparisons with the UK, until I noticed that South African taxes now matches those of UK.

Another reason to invest offshore for dividends. Find a good accumulation fund that does not declare dividends as they are all rolled up into the fund automatically.

Maybe. Why do you think the rolled-up income would not be taxable at the time it arises ?

@ cheetah: Because it does not get taxed…………..? It is not even on the UT statements?

If you have other facts please expand.

I asked because I don’t know – so there’s no distribution at all, rather than a distribution that is reinvested ?

Still subject to CGT I assume, but I can see the advantage in controlling the timing of cashflows.

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