2011/12 Budget Highlights

The recent national budget speech announced a number of interesting changes to taxation.

• TRANSFER DUTY ON FIXED PROPERTY PURCHASES will now only kick in from R600 000 (Previously R500 000) at 3% and escalate in a tiered structure where the amount over R1m will be taxed at 5%, amounts over R1,5 at 8%. Legal persons will now be subjected to the same tiered transfer duty as natural persons (previously taxed at a flat rate of 8%)

• Tax free portion of LUMP SUMS AT RETIREMENT has been increased (Hopefully this will happen regularly to offset the effect of inflation)

• An additional tax rebate has been introduced for taxpayers 75 years old and over.

• The new dividends tax effectively brings to an end the usefulness of the so called “dividend yield” unit trusts.

From 1 March 2012, employers’ contributions to retirement funds will be regarded as a taxable fringe benefit. Employees will be allowed to deduct contributions of up to 22.5% of their taxable income to retirement funds, up to a maximum limit of R200000 per annum. This limits the deductions allowable for higher earners.

Lump sum withdrawals from provident funds will be limited to one third (Same as RA’s and pension funds)

Estate duty is being considered for review/elimination as it is not a cost effective tax.

I trust you have found this brief outline useful – please be in touch if you’d like any further information.