Are you an individual human being, or a small business owner with an obligation to pay tax to the state? If you answered yes to either one of those questions, then you’ll want to read our top nine take home points from yesterday’s budget speech, as digested by Michael Rushby over at Galbraith-Rushby.

The minister of finance indicated that personal tax relief in 2014/15 would be R9.25 billion. This is up from the previous budget speech of R7.00 billion. A person earning R200 000 per year now saves R106 per month (2014: R86). When considering all the increased costs (rates, fuel levy) this seems somewhat low.

So with that in mind, what are the top nine things you need to know?

1) Tax free lump sum – An increase in the tax-free lump-sum amount paid out of retirement funds from R315 000 to R500 000

2) Medical tax credits – Monthly medical scheme contribution tax credits will be increased from R242 to R257 per month for the first two beneficiaries, and from R162 to R172 per month for each additional beneficiary, with effect from 1 March 2014.

3) Exercise duties – Increases in excise duties on alcoholic beverages and tobacco products are proposed, adding 9 cents to the price of a 340ml can of beer and 68 cents to a packet of 20 cigarettes. Whisky goes up by R4.80 a bottle. These increases take effect immediately.

4) Fuel Levy – General fuel levy increase is limited to an inflation-related 12 cents per litre on 2 April 2014, and the road accident fund levy will increase by 8 cents per litre.

5) Personal insurance policies – The tax treatment of life and disability premiums and policy proceeds was aligned in 2013, with effect from 1 March 2015. The premiums will not be deductible and the policy proceeds will be tax free.

6) Interest exemption – Interest from a South African source earned by any natural person under 65 years of age, up to R23 800 per annum, and persons 65 and older, up to R34 500 per annum, is exempt from taxation.

7) Interest earned by someone outside SA – Interest is exempt where earned by non-residents who are physically absent from South Africa for at least 182 days during the 12 month period before the interest accrues or is received and who were not carrying on business in South Africa through a fixed place of business during that period of 12 months. From 1 January 2015 the debt from which the interest arises must not be effectively connected to a fixed place of business in South Africa.

8) VAT relief on fuel sales – Because petrol, diesel and illuminating paraffin are zero-rated for value-added tax (VAT) purposes, the resulting difference from a standard rating, when used by final consumers, is regarded as tax expenditure. It was assumed that 20 per cent of petrol sales was used for business purposes (by VAT vendors) and would have qualified to claim input VAT. For diesel, it was assumed that 90 per cent of sales was used for business purposes and would have qualified for input VAT.

9) Small businesses –  What was concerning was the commentary that said that Judge Davis, the head of the Tax Committee has made some recommendations in an effort to ease compliance burden:

• The turnover tax regime will be amended to further reduce the tax burden on micro-enterprises.

• Consideration is being given to replacing the graduated tax structure for small business corporations with a refundable tax compliance credit.

There is a view that the small business corporations are being used as a tax advantage and eroding the tax base and it is not achieving the desired results.

Brought to you by Galbraith Rushby