Budget Highlights 2010

1. INDIVIDUALS

The maximum marginal rate for natural persons remains at 40% and is reached where taxable income exceeds R552 000(previously R525 000)

The minimum rate of tax remains at 18% on income not exceeding R140 000 (previously R132 000).

The primary rebate for all natural persons has been increased to R10 260 (previously
R9 756). The additional rebate for persons aged 65 years and older has also been increased to R5 675 (previously R5 400).

The tax free portion of interest income has been increased to R22 300 (previously
R21 000) for taxpayers under 65 years, and to R32 000 (previously R30 000) for persons aged 65 years and older.

R3 700 (previously R3 500) inclusive of the above exemption can be applied to foreign interest and foreign dividends.

Taxpayers over 65 years continue to be exempt from the payment of provisional tax, provided their taxable income does not exceed R120 000 per annum and is derived solely from salary, interest, dividends and rental.

2. COMPANIES AND CLOSE CORPORATIONS

The rate of normal tax remains at 28% in respect of the next year of assessment, being years ending between 1 April 2010 and 31 March 2011.

The rate of secondary tax on companies (STC) remains at 10% on net dividends declared by companies and distributions made by close corporations. As previously announced, during 2010, STC will be replaced with a final withholding dividend tax at the rate of 10%.

The combined rate of tax (normal tax and STC) where all profits are distributed is 35,2%.

3. TRUSTS

The flat rate of 40% remains unchanged

4. INDIVIDUAL TAX THRESHOLDS

Liability for tax commences as follows:

Under 65 years : R57 000 (previously R54 200)
65 years and older: R88 528 (previously R84 200)

INCOME TAX: INDIVIDUALS AND TRUSTS

Taxable income Rates of tax

0 – 140 000 18% OF TAXABLE INCOME
140 001 – 221 000 25 200 + 25% OF TAXABLE INCOME ABOVE 140 000
221 001 – 305 000 45 450 + 30% OF TAXABLE INCOME ABOVE 221 000
305 001 – 431 000 70 650 + 35% OF TAXABLE INCOME ABOVE 305 000
431 001 – 552 000 114 750 + 38% OF TAXABLE INCOME ABOVE 431 000
552 001 AND ABOVE 160 730 + 40% OF TAXABLE INCOME ABOVE 552 000

TRUSTS OTHE THAN SPECIAL TRUSTS – RATE OF TAX – 40%

TAX REBATES

PRIMARY R10 260
ADDITIONAL R 5 675

TAX THRESHOLDS

BELOW AGE 65 R57 000
AGE 65 AND OVER R88 528

TAX THRESHOLD

5. ESTATE DUTY AND DONATIONS TAX

The rate of estate duty and donations tax remains at 20%.

The estate duty abatement (exempt threshold) remains at R3,5 million per person and a surviving spouse may also benefit automatically from any unused deduction in the first dying spouse’s estate. i.e. The abatement remains a combined maximum R7 million for the second dying spouse.

The first R100 000 of property donated in each tax year by a natural person remains exempt from donations tax as do donations between spouses.

6. CAPITAL GAINS TAX (CGT)

• The annual capital gain exclusion remains at R17 500.
• The primary residence exclusion from capital gains tax will remain at R1,5 million.
• The capital gain exclusion on death remains unchanged at R120 000.
• The effective rate of CGT remains at 4,8% – 10% for individuals, 14% for companies and 20% for Trusts, although correctly structured Trusts can result in the individual rate being applicable.

7. TRANSFER DUTY

The rates remain unchanged. Property costing less than R500 000 will attract no duty. The 5 per cent rate will apply between R500 000 and R1 million, and 8 per cent thereafter. The flat rate for companies, close corporations and trusts remains at 8 per cent.

8. RETIREMENT FUNDS

The new tax regime effective 1 October 2007 on lump sum benefits upon retirement remains unchanged, as does the withdrawal formula introduced last year. The tax deduction limits on contributions to retirement funds remains the same.

8.1 Lump sum amounts payable by an employer upon termination of service (previously R30 000 tax free) will now qualify for the R300 000 tax free dispensation granted to lump sum benefits from retirement funds, albeit that all such lump sums are aggregated.

9. MEDICAL EXPENSES

Taxpayers 65 and older may continue to claim all qualifying expenditure. The tax exempt or deductible portion of monthly contributions to medical schemes for persons under 65 is increased from R625 to R670 for each of the first two beneficiaries and from R380 to R410 for each additional beneficiary.

10. VAT

The rate of 14% remains unchanged and the compulsory VAT registration threshold remains at R1 million.

11. VOLUNTARY DISCLOSURE PROGRAMME

In order for non compliant taxpayers to regularize their tax affairs where SARS is not aware of the default, a voluntary disclosure system will be implemented between 1 November 2010 to 31 October 2011. Tax due remains fully payable, but relief with regard to interest and penalties will apply.

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