Tax Update 2013

Ronald N King CFP®Head: Technical Support Services

PSG Wealth

National Development - 10 Point Plan1. A social compact to reduce poverty & inequality2. Address poverty, by access to employment, social wage, public

transport & rural income3. Professionalise the public service4. Boost private investments in labour intensive areas5. Improve education6. National Health Insurance7. Public infrastructure investment @ 10% of GDP8. Environmental sustainability9. New spatial norms & standards – redevelop cities10. Reduce crime

How is it funded?• Personal Income Tax R306bn• Companies Tax R170bn• Dividend Tax R 23bn• Property Tax R 9bn• VAT R243bn• Fuel Levy R 45bn• Electricity Levy R 8bn• Custom Duties R 42bn• Excise Duties R 34bn• Other Taxes R 18bn• TOTAL TAX REVENUE R898bn increase 10.86%

Personal Income Tax

Personal Income Tax

Personal Income Tax

In Summary:45.6% of Personal Income Tax comes from 5.5% of

taxpayersOr

15.5% of Total Tax Revenue comes from the salaries of 0.7% of the population

Excise DutiesMalt Beer Increases by 7.5c to R1.08 per 340ml can

Fortified Wine Increases by 19.5c per 750ml bottle

Unfortified wine Increases by 15c per 750ml bottle

Sparkling wine Increases by 56c per 750ml bottle

Ciders Increases by 7.3c per 330ml bottle

Spirits Increases by R3,60 to R39,60 per 750ml bottle

Cigarettes Increases by 60c to R10,92 per packet of 20

Pipe tobacco Increases by 32c to R3,54 per 25g

Medical tax credits & deductions• Tax credits increased from:

• R230 to R242 for taxpayer and 1st dependant• R154 to R162 for each additional dependant

• Deduction of so much of aggregate of medical aid contribution in excess of 4 x tax credit and all expenses not paid by medical aid that exceeds 7.5% of taxable income

• For disabled persons medical aid contributions in excess of 4 x tax credit as well as all expenses not paid by medical aid

• Persons over the age of 65 are still able to deduct all of their medical expenses

Interest Exemptions• Interest Exemptions increased to:

• R23,800 for under 65• R34,500 for over 65

• Probably capped at this level• 2015 will see the introduction of Savings Investment Plan where

growth within the fund as well as withdrawals will be tax-free.• R30,000 contribution per annum and R500,000 over life-time.• Once withdrawn cannot replace• Will play an important role in financial planning

Retirement fund contributions• The date is still unclear• Might also see some future changes in final legislation• Contributions to all retirement funds will be deductible up to the

highest of 27.5% of taxable income/remuneration or R350,000• Contributions not deducted will roll over to following year.• At retirement will increase tax-free lumpsum• Remainder deemed to be deduction against pension

Preservation of Retirement funds• At resignation all money must be transferred to a Preservation fund• Will be allowed to withdraw 10% per annum of original investment• Withdrawals from retirement annuities are also being considered• After 2015 all new contributions to a provident fund will be treated

the same as a pension fund• Retrenchment still taxed similar to retirement

Trusts• Trusts are again being targeted• In stead of the abolishment of estate duties steps will be taken to

prevent estate duty avoidance through trusts• The flow through principle of trusts will be removed• Distributions from offshore foundations will be fully taxable in the

hands of the beneficiary

Foreign exchange profits• Taxation of CGT on exchange profits have changed from 1 January

2013 for natural persons and non-trading trusts• On direct investments the currency profit/loss is not taken into

consideration• On asset swap transaction the currency profit/loss is taken into

consideration

Foreign exchange profits• Invest R1,000,000 at exchange rate of 10:1• After 5 years the investment has grown from 100,000 to 120,000• Exchange rate now 20:1

• Direct Investment: 120,000-100,000 = 20,000 profit @ 20 = R400,000

• Asset Swap: R2,400,000 – R1,000,000 = R1,400,000

Other changes• Income protection policies will no longer be tax deductible• Re-insurance loophole to be closed• Reduction of debt by way of a donation will no longer have a CGT

effect• Small Business Corporations will now have a R20m turnover

threshold. Their tax brackets have also been improved substantially• Donations above 10% can be carried over• Removal of means test for old age grants will result in changes to

primary and secondary rebates in 2016• Hedge funds will be regulated as CIS, but their earnings will be

revenue

Other changes• Green taxes

• Carbon tax to be introduced from 2015• CO2 emissions tax increase• Plastic bag levy increase from 4c to 6c per bag• Incandescent bulb levy from R3 to R4 per bulb• Fuel levy now 26% of pump price

• VAT payable on all foreign digital purchases

Questions?

Ronald N KingPSG Wealth