The expected personal income tax rate increase has been limited to 1% for each band (excluding the lowest band, under ZAR181 901). The new top rate of 41% applies from 1 March 2015 to taxable income over ZAR701 300 per annum, and also to trusts. The knock-on effect is that the maximum effective rate of capital gains tax (CGT) has increased to 13.65% for individuals (from 13.32%) and to 27.31% for trusts (from 26.64%).
Individuals with taxable income of ZAR1m per annum will pay ZAR4 551 more in tax each year, or ZAR379 per month. At ZAR1.5m taxable income per annum this becomes ZAR795 more tax per month, while individuals with ZAR2m of taxable income per annum will owe ZAR1 212 extra to SARS each month.
No additional income taxes have been introduced, and the National Health Insurance Levy remains off the table for now.
Since a fixed portion of capital gains is included in taxable income, the income tax rate increase is also a capital gains tax rate increase, although not nearly as significant as some commentators had predicted since the inclusion rates themselves have not been increased (33.3% for individuals and 66.6% for other taxpayers).
While the trust rate remains linked to the top personal tax rate of 41%, there remains a differential between individual CGT and trust CGT that many planners feared would be closed. Although the Minister has also chosen not to introduce any new wealth taxes, or increase the rates of donations tax or estate duty, a new transfer duty rate of 11% on properties valued at over ZAR2.25m could impact a very large number of transactions from 1 March 2015 (the top rate was previously 8%, which now applies between ZAR1.75m and ZAR2.25m). South Africa now boasts with perhaps the highest rate of transfer duty in the world, but has one of the lower rates of VAT.