Tax proposals in brief
04 March 2013
Posted by: SAIT Technical
By Laura du Preez (Business Report)
SMALL BUSINESS. Finance Minister Pravin Gordhan has
given owners of small businesses a break by raising the taxable income
thresholds and introducing a new tax bracket for businesses with an annual
income of between R365 001 and R550 000.
The turnover threshold for small
businesses has also been increased from R14 million to R20 million.
From April, businesses with a
taxable income of less than R67 111 a year will pay no tax; those with an
annual income of between R67 112 and R365 000 will pay tax at a rate of seven
percent; those with an annual income of R365 001 to R550 000 will pay 21
percent; and those with an annual income of more than R550 001 will pay 28
DONATIONS TAX. In future you may be able to make
donations to public benefit organisations (PBOs) that exceed the amount you are
allowed to claim as a deduction in a tax year and still enjoy tax relief on the
full amount by spreading the deduction over a number of tax years.
In the Budget Review, National
Treasury says that, currently, donations to PBOs that exceed 10 percent of your
taxable income cannot be carried forward, and this reportedly discourages large
donations. It will therefore propose that tax legislation is amended to allow
donations that exceed 10 percent of your taxable income to be rolled over to
the next tax year.
PENALTY RELIEF. Taxpayers who are afraid of
mistakenly under-declaring their income and being hit by the penalties that the
South African Revenue Service (SARS) introduced recently can rest a little
easier knowing that this situation will soon be addressed.
The Budget Review says the penalties
for understatement "will be refined, and relief will be provided for bona fide
You can be penalised 25 percent or
even 50 percent of the tax you have underpaid if SARS regards your
understatement of tax as substantial. A substantial understatement is defined
as one that results in your paying tax that is more than five percent less than
what you should have paid.
A penalty of 50 percent is reserved
for those who repeatedly understate their income; a penalty of 125 percent can
be imposed if you are grossly negligent in stating your income; and 200 percent
if your intention was to evade tax.
Stiaan Klue, chief executive of the
South African Institute of Tax Practitioners, says the tax laws are vast, and
there are changes almost daily. Therefore, it is inevitable that almost all
taxpayers will make an honest understatement mistake, whether technical in
nature or through some other error.
SUBMISSION OF RETURNS. If you earn less than R250 000 a
year from a single employer, you may in future not have to submit a tax return.
The Budget Review says that, currently, individuals who earn less than R120 000
a year do not have to submit a return, but government plans to raise this
income level to R250 000. This will be implemented for this year’s tax filing
HEDGE FUNDS. Investors in hedge funds may in
future have gains from the sale of units in these funds treated as revenue
rather than as capital gains, the Budget Review says.
It is expected that hedge funds will
be fully regulated for the first time under the Collective Investment Schemes
Control Act, and the flow-through tax regime will apply to them, with one
Keith Engel, director of tax policy
at National Treasury, says it is difficult for hedge funds to distribute to
investors the cash they make from trades in securities, as is typically
required of collective investment schemes. Therefore, it is proposed that gains
in hedge funds be exempt from income tax. As a consequence, however, the gains
from the disposal of fund units will be taxed as revenue in the hands of the
unitholders when they disinvest.
Apart from hedge funds, Engel says
interest income funds that hold certain instruments, such as zero-coupon bonds,
may be treated in a similar way, because it is difficult to distribute the
interest on these instruments until they mature or are sold. In return,
unitholders of these funds may also be regarded as receiving taxable income,
rather than capital, when they sell their units.
Engel also warned that the unfair
preferential tax treatment that a dividend income fund is continuing to receive
will be terminated.