By Succession Financial Planners, 14th March 2017
Specifically the new top income tax bracket of 45%.
Simply put, if you earn more than R1.5-million a year, any amount above that level will now be taxed at 45% – the top marginal tax rate. The last time South Africa had a 45% tax bracket was in the late 1980s (although it had been higher during the 1970s, at a whopping 60% – refer to Table 2.1 here). Levels of all other tax brackets have been upwardly adjusted by 1%.
Other tax changes are as follows:
In December 2016, Stats SA recalculated its basket of goods and services that make up the Consumer Price Index. This fresh look at the cost of living factors in spending patterns of newly-minted middle- and upper-income earners. Costs like sectional-title levies, diesel, and driving lessons are just some of the interesting new components. This points to a change in higher-LSM household spending patterns, which in turn are an indicator of upwardly-mobile household incomes. However, just what differences can be expected in inflation numbers might not become evident until there is sufficient historical data to recalculate various LSM categories, but – in the meantime – a useful tool for personal consumer inflation is available on the Stats SA website, here.
Naturally, new money is being taxed accordingly, and this year’s budget speech let taxpayers know just how closely they are being scrutinised. Bracket creep in the known tax categories is minimal, but the advent of the new top tax bracket sounds a warning to South Africans that top earners are going to see a new dent in their payslips or remuneration figures. Significant increases in the Road Accident Fund levy and the general fuel levy mean that business owners will have increased transportation and delivery bills, affecting the bottom line. Excise duties on tobacco and alcohol will be cause for a hangover or two – 6% to 10% is going to be noticed, one way or another.
Last year’s shortfall of R30-billion in expected tax receipts is going to be felt, particularly amongst top earners.