BUDGET 2020 TAX YEAR | HIGHLIGHTS & TAX RATES

 

BUDGET 2019/2020 TAX YEAR for the period 1 March 2019 until 29 February 2020

Income Tax

 

We are pleased to inform you that as from 1 March 2019, the tax rates for individuals have remained the same as last year, with only the tax thresholds and rebates increasing, as announced in the 2019/2020 Budget Speech on 20 February 2019.

 

Individuals, across the country, earning qualifying income above the new tax threshold of R79 000 (previously R78 150) will be paying increased taxes of R12.8bn (previously R6.8bn in actual tax increases) for the next tax year. No adjustment has been made for inflation so that means if you receive an increase from your employer, you will actually be paying more tax in real terms. So just because inflation went up, doesn’t mean SARS lets you off the hook.

 

You will essentially see the most minor increase in take home pay on your payslips each month from 1 March. The only good news here is that there was no tax increase!

 

Taxpayers over 65 and below 75 years of age will have their first R122 300 tax free (previously R121 000) and those taxpayers over 75 years of age will be tax free from R136 750 (previously R135 300) of income.

 

Super earners are still going to be taxed a whopping 45% per every R1 earned above R1 500 000 per year being at least R532 041, no change from prior year. Therefore the biggest earners still pay the most tax each year.

 

Taxable Income (R) Rate of Tax (R)
0 – 195 850 18% of taxable income
195 851 – 305 850 35 253 + 26% of taxable income above 195 850
305 851 – 423 300 63 853 + 31% of taxable income above 305 850
423 301 – 555 600 100 263 + 36% of taxable income above 423 300
555 601 – 708 310 147 891 + 39% of taxable income above 555 600
708 311 – 1 500 000 207 448 + 41% of taxable income above 708 310
1 500 001 and above 532 041 + 45% of taxable income above 1 500 000

 

The tax threshold has increased from R78 150 to R79 900 because the primary rebate has increased from R14 067 to R14 220.

 

The following taxes and tax credits remain the same for 2019/2020

 

Capital Gains Tax (CGT)

There were no changes to CGT this year. Individuals still have to include 40% of the gain in their income while companies and trusts still have to include 80% of the gain into their income. The overall maximum effective tax rates for individuals remains unchanged from last year at 18% and for companies and trusts it also stays the same at 22.4% and 36% respectively.

 

Dividends

The Withholding Tax on Dividends remains the same at 20%.

 

Estate Tax and Donations Tax

Donations Tax remains unchanged – it is levied on amounts over R100 000 in total per year at 20% and at a rate of 25% on donation values exceeding R30m. Remember that donations between spouses are still tax free!

The Estate Duty threshold above R3.5m will still be taxed at 20%, however for those huge estates over R30m, will be taxed at 25%.

 

Interest and investment exemptions

The interest exemption thresholds stay at R23 800 for those under 65 years of age and R34 500 for those over 65. Tax free investments, which means no Dividends Tax, no CGT and no Income Tax for investments are still capped at R500 000 over a lifetime will keep its annual contribution limit of R33 000.

 

Medical Tax Credits – NO CHANGES

You and your first dependent will be allowed a tax credit of R310 (previously R310) and thereafter R209 (previously R209) for all other dependents. Fortunately the minister has not announced that the medical tax credit will be scrapped, not yet anyway!

 

Lump sum pay-outs (rates below)

 

No changes on the taxable rates of lump sums and the retirement laws which allow provident funds to be deductible alongside retirement annuity and pension fund contributions remain the same. The regime allows for a capped 27.5% of the greater of Gross Income (so all earnings) or Taxable Income (income after deductions) to the max of R350 000 per year.

 
Retirement fund lump sum withdrawal benefits 

Taxable Income (R) Rate of Tax (R)
0 – 25 000 0% of taxable income
25 001 – 660 000 18% of taxable income above 25 000
660 001 – 990 000   114 300 + 27% of taxable income above 660 000
990 001 and above 203 400 + 36% of taxable income above 990 000

 
Retirement fund lump sum benefits or severance benefits

Taxable Income (R) Rate of Tax (R)
0 – 500 000   0% of taxable income
500 001 – 700 000 18% of taxable income above 500 000
700 001 – 1 050 000 36 000 + 27% of taxable income above 700 000
1 050 001 and above 130 500 + 36% of taxable income above 1 050 000


Small Business Tax (rates below)

 

These rates have moved by a whopping R59.50 (previously R168) less tax payable for businesses who earn less than R79 000. We still believe that small business’ are not being looked at properly and deserve some better tax treatment!

 
1) Income Tax: Small Business Corporations

Taxable Income (R) Rate of Tax (R)
0 – 79 000   0% of taxable income
79 001 – 365 000 7% of taxable income above 79 000
365 001 – 550 000 20 020 + 21% of taxable income above 365 000
550 001 and above 58 930 + 28% of the amount above 550 000

 
2) Turnover Tax for Micro Businesses

Taxable turnover (R) Rate of Tax (R)
0 – 335 000 0% of taxable turnover
335 001 – 500 000 1% of taxable turnover above 335 000
500 001 – 750 000 1 650 + 2% of  taxable turnover above 500 000
750 001 and above 6 650 + 3% of taxable turnover above 750 000

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