BUDGET 2005/06
Trevor gives us a break
Richard Mantu
23 February 2005
A robust economy enabled Finance Minister Trevor Manuel to put more money in the pockets of individuals and households this year, with income tax relief totalling R6.8-billion.
The R6.8-billion represents compensation for the effects of inflation and real tax relief in all income groups, with 62% of total relief going to those earning below R200 000 a year.
Thanks to strong revenue collection - with a projection of R11-billion more than budgeted last year - Manuel also increased the income tax threshold. Individuals younger than 65 years of age who earn R35 000 or less a year will now cease to pay income tax, as will people over the age of 65 who earn R60 000 or less per annum.
Individuals younger than 65 who earn R60 000 a year or less will be taxed 7.5% of their earnings - representing an annual saving of R500 on tax. People who earn R90 000 a year or less will be taxed 12% of their earnings - a saving of R920 a year.
Manuel
also announced that interest income exemption levels - crucial for those who rely on interest as their main source of income - will increase from R11 000 to R15 000 for people below 65 years and from R16 000 to R22 000 for senior citizens.
This means, for example, that a 40-year-old who invests R210 000 in a savings account at 7% interest per annum will not be taxed on their annual interest income of R14 700.
Alternatively, it means that a pensioner and spouse (both older than 65) each investing R275 000 (in total R550 000) and earning 8% interest per annum will not pay tax on their combined annual interest income of R44 000.
This measure will put an additional R310-million into the pockets of poor South Africans, in particular pensioners.
Making homes 'slightly more affordable'
South Africans will also have more reason to buy new homes after Manuel slashed transfer duties, announcing tax relief of about R450-million, with
effect from 1 March.
A property buyer spending R190 000 or less will now pay no transfer duty, while a purchaser of R330 000 or more will pay transfer duty of R12 600, R2 300 less that the duty previously payable.
In a bid to encourage more South Africans to use banking services - following the launch last year of the low-cost "Mzansi" account - the government will also remove stamp duties on debit entries and installment credit agreements with effect from 1 March.
Smokers, drinkers punished again
However, Manuel continued his trend of punishing smokers and drinkers by increasing excise tax or so-called "sin taxes" with effect from 23 February.
Drinkers will now pay five cents more on a 350ml can of malt beer, with wine increasing by 18 cents per 750ml bottle and spirits by R1.48 cents per 750ml bottle.
Smokers will pay 52 cents more for a packet of 20s cigarettes.
The increase in alcohol and tobacco products
duties will raise R1.6-billion in additional revenue.
Source: BuaNews
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