This year’s Budget Speech, delivered by the Minister of Finance on 25 February 2026, held many positive developments, which were good news for businesses and taxpayers of South Africa. The key change was that the government withdrew the R20 billion tax increase under consideration and provided some much-needed relief to various taxpayers.

However, it should be noted that the budget remains a proposal and must still be formally debated and voted on in Parliament.

In a nutshell, personal income tax brackets and medical tax credits will be adjusted for inflation for the first time in three years, there are no major tax hikes, and great support for small businesses.

SOME OF THE HIGHLIGHTED CHANGES ARE…

• The R20 billion tax increase has been withdrawn.
• The annual tax-free savings investment incentive has been increased from R36 000 to R46 000.
• Personal income tax brackets and medical tax credits will be fully adjusted for inflation.
• The retirement fund deduction limit increases from R350,000 to R430,000.
• The primary residence exclusion for CGT increases from R2 million to R3 million.
• Tax thresholds and limits are also adjusted for inflation to assist small businesses and encourage savings.
• Fuel levy increase of 9c/l for petrol and 8c/l for diesel.
• Road Accident Fund levy increases by 7c/l to R2.25/l from 1 April.
• The carbon fuel levy will increase to 19c/l for petrol and 23c/l for diesel from 1 April
• VAT: No change to the rate, however, greater support for small businesses with the registration threshold updated for the first time since 2009, from R1 million to R2.3 million.
• Corporate tax: No change
• Sugar tax: No change.
• Sin tax: Alcohol and tobacco increase by 3.4%

Some encouraging news is that South Africa obtained its first credit rating upgrade in 16 years and was removed from the FATF grey list. Revenue collections for 2025/26 have been revised upwards by R21.3 billion due to stronger VAT, corporate income tax and dividends tax collections.

The withdrawal of the R20 billion tax increase proposal, combined with inflation adjustments to personal income tax thresholds, means the overall tax burden for individuals and small enterprises will not increase materially. However, taxpayers should be aware that SARS continues to intensify compliance and enforcement activities, particularly in the areas of transfer pricing, trusts, cryptocurrencies, cross-border transactions and illicit trade.

Action Tips to Consider

• Review your tax planning strategy early in the year — don’t wait until filing season.
• Accurate bookkeeping and timely submissions are no longer optional, but critical.
• Make sure your business is registered under the most beneficial tax structure, so it does not miss out on tax relief.
• Review your payroll compliance to avoid any mistakes, as this is one of the most common audit triggers.
• Plan your cash flow around provisional payments, so you will not be caught off guard and under budgeted.
• Taxpayers with offshore crypto holdings must ensure these are properly disclosed.

If you need assistance reviewing your tax position, preparing financial statements, or ensuring full compliance with SARS requirements, Dirmeik Consulting is ready to support you — professionally, practically and proactively. You can find our latest Tax Guide here.

Let’s make this financial year one of clarity, compliance and growth.

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VAT (Value Added Tax)

Considering the impact of a VAT adjustment, VAT will be increased from 15% to 15.5% on 1 May 2025 and to 16% on 1 April 2026. More VAT zero-rated foods will be added to relieve poorer households, as will social grants be increased by more than the inflation rate. The fuel levy will also remain unchanged.

Transfer Duty

The Minister announced that the monetary thresholds for transfer duty will be adjusted upwards by 10% to counter inflation. As such, purchasing a property with an acquisition value of R1,210,000 or less will not attract the payment of transfer duty. This threshold adjustment, proposed to take effect on 1^st April 2025, will reduce the associated cost of purchasing property and attract more prospective buyers.

Personal income tax and medical tax credits

For the second year running, personal income tax brackets, individual rebates, and medical tax rebates remain unchanged and will not be adjusted for inflation.

Other taxes

Offering some relief to stressed taxpayers, the Minister did not propose increases to capital gains tax, dividends tax, estate duty, corporate income tax, or donations tax. However, the monetary thresholds for tax-free investments and interest income exemptions remain unchanged.

The carbon tax on fuel will increase by 3 cents. This effectively raises the petrol carbon tax from 11 cents to 14 cents per liter and from 14 cents to 17 cents in the case of diesel.

Increase of 6.75% in excise duties on alcoholic beverages.

6.75% rise in excise duties on cigars and pipe tobacco and 4.75% on cigarettes and other tobacco products.

Tax Rebates for Natural persons remain unchanged, as follows:

• Primary: R17 235
• Secondary (Persons 65 and older): R9 444
• Tertiary (Persons 75 and older): R3 145

Thresholds for Natural persons:

• Below age 65: R95 750
• Age 65 to below 75: R148 217
• Age 75 and over: R165 689

For further information on how this budget affects you personally or your business, contact Dirmeik Consulting today.

The post 2025 Budget Speech Summary appeared first on Dirmeik Consulting.

It is important to remember that accessing retirement funds early means you have less available at retirement and impacts your tax-free savings portion. It affects the ability of your retirement funds to benefit from compound interest and grow at a rate that will ensure you have enough to retire comfortably.

Although commonly referred to as the two-pot retirement system, from 1 September 2024, your retirement contributions were automatically divided into three pots:

1. Savings pot – One-third of new contributions will go into the savings pot, and will be accessible before retirement, once a tax year, for emergencies. 10% of the market value of your account on 31 August 2024 was seeded from your vested pot, but was subject to a maximum of R30 000.
2. Retirement pot – Two-thirds of new contributions will go into the retirement pot, and can’t be touched before retirement, except under exceptional conditions.
3. Vested pot – Houses all your retirement savings up to 31 August 2024 and will stick to the existing rules and regulations.

Pension fund members are now allowed to withdraw from the savings pot of their Retirement funds. To apply, you will need to instruct your Fund so they can request the required tax directive from SARS.  This means that only registered taxpayers can benefit from this new retirement scheme.

As contributions made to your retirement funds are not taxed, tax will be deducted from any amount withdrawn at the rate applicable to the individual’s taxable income. However, those intending to withdraw funds must ensure that they have no outstanding debt owing to SARS, as this will be deducted from the withdrawal amount.

Once a withdrawal amount has been decided on, which has a minimum of R2000, it will take up to 48 hours for SARS to issue the directive. Before a final amount is paid to the applicant, the pension fund will be informed to deduct any outstanding debt on behalf of SARS before the payout is made to the member. Remember that you can also only withdraw once a year, so choose the amount wisely.

A tax calculator is available on SARS e-Filing website to assist you with an illustrative amount of what you can expect as a payout.  However, all relevant and accurate information must be provided to get a clear estimate of the payout.

The tax implications for pension fund members who earn below the tax threshold and then make a withdrawal from the savings pot will only be determined during the annual Filing Season when taxable income will be taxed at 18%. As the sum of the withdrawal will be added to your employment and other income, this could push you into a higher tax bracket, leaving you to have to pay more tax. Any over or under-deduction of tax from a savings-pot withdrawal will be settled in the taxpayer’s next assessment during the annual submission of their ITR12 return.

If a member chooses not to withdraw from their savings pot before retirement, the remaining funds will be taxed as a lump sum benefit upon retirement. These tax rates are generally lower than the marginal tax rates applied to withdrawals before retirement.

However, if you are already a pensioner or aged 55 and over as of 1 March 2021, who did not opt-in when contacted, you will not be eligible to apply for a savings pot withdrawal.

Existing members can still withdraw a cash lump sum of up to R550 000. However, this R550 000 is a cumulative withdrawal total over your lifetime, which means this tax benefit could be eroded by pre-retirement withdrawals.

To ensure you fully understand the tax and other implications of early retirement fund withdrawals in the short term and at retirement, seek professional advice by contacting us at Dirmeik Consulting.

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1. The First return which covered the estimated income for the tax year, based on the expected taxable income for the period 1 March to 31 August. The deadline to submit your next IRP6 return and make payment is the 31 August 2024. This return is the First IRP6 for the 2025 tax year.
2. The Second return which covers the estimated taxable income for the full year, for the period 1 March to 28 February. The deadline to submit this return and make payment is 28 February.
3. The Third return is optional, for those who were did not have their final figures or were unable to accurately calculate their February income. This additional top-up payment will avoid being penalized for underestimating your income when you submit you’re annual ITR12 income tax return. This deadline to submit this return and make payment is 30 September.

Provisional tax ensures that businesses and individuals, such as Freelance Artists, Independent Contractors, Sole Proprietors, Landlords or Investors, declare and pay tax on income that hasn’t already been taxed by their employers, pensions, or other sources.

As confusing as it may seem, provisional tax is not a separate tax from income tax. The purpose of Provisional Tax is to benefit those taxpayers with hefty taxation payments due, to allow them to spread these over two or three instalments, instead of a once off payment at the end of the tax year. Upon the assessment of your compulsory annual Income Tax Return (ITR14 for companies or ITR12 for individuals), your provisional tax payments will be off-set against your normal tax liability. If you underpaid, you will need to make an additional payment, including a penalty for underestimating your income, and if you overpaid, a refund, including any interest that was earned on the overpayment, will be due to you.

WHO IS ELIGIBLE?
All businesses or trusts, regardless of size or trading activity must submit a provisional return, even if you are running at a loss. For individuals who earn multiple salaries or income from other sources, then the threshold varies depending on age and tax year. For the 2024 and 2025 tax year (March to February), you don’t need to register for Provisional tax, if your total annual taxable income falls below the following thresholds:

• R 95 750 if you are under 65, or
• R 148 217 if you are older than 65 and younger than 75; or
• R 165 689 if you 75 and older

Additionally, you only need to register for provisional tax if those other sources of income, exceed R30,000 for the year. Neglecting to file your Provisional return before SARS deadlines can have serious consequences and can lead to Penalty fines of R250 to R16 000 for both trading and inactive companies. Your business also runs the risk of becoming non-tax compliant, which means you will not be able to apply for new tenders, contracts or loans.
Provisional tax is a critical aspect of financial responsibility for businesses and individuals. Understanding your obligations, registration requirements, and payment deadlines is essential to avoid penalties and ensure compliance with tax regulations.

Dirmeik Consulting provides comprehensive tax services and can help you to correctly navigate your Provisional Tax obligations to keep you tax compliant. To find out how we can assist you to maximize your financial well-being or to set up a consultation with us, contact us here.

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Further bad news for companies, is that SARS will be implementing a global minimum corporate tax that will bring more business operations into the tax net, subjecting multinational companies to a tax rate of at least 15%, regardless of where its profits are located.

Some good news was that the expected VAT increase to 16% was not introduced and will remain at 15%.  There was also no increase to the general fuel levy, while the accident fund levy and the customs and excise levy will remain unchanged.  In 2026, producers of electric vehicles in South Africa will be able to claim 150% of qualifying investment spending, as an incentive to aid the transition to new energy vehicles.

Changes to the environmental taxes are as follows:-

• Carbon tax increased from R159 to R190 per tonne of carbon dioxide equivalent, as of 1 January 2024.
• Carbon fuel levy will increase to 11 cents per litre for petrol and 14 cents per litre for diesel effective from 3 April 2024.
• Plastic bag levy will increase from 28 cents a bag to 32 cents from 1 April 2024.
• Incandescent light bulb levy will rise from R15 to R20 per light bulb from 1 April 2024.

The brackets of the property transfer duty table also remain unchanged, providing no additional incentive to buyers, with properties below R1.1 million remaining exempt from the tax.

The budget also includes a hike in excise duties on alcohol of 6.7% to 7.2%, while duties on tobacco products will increase by 4.7% to 8.2%.  Godongwana also said they would be tabling an increase of the excise duty on electronic nicotine and non-nicotine delivery systems, known as vapes, to R3.04 per milliliter.

These changes to the budget are expected to grow South Africa’s economy over the next three years at an average of 1.6%. The government has said they would be prioritizing energy and logistics reforms, along with measures to arrest the decline in state capacity.

Rebates remain unchanged, as follows:-

• Primary – R17 235
• Secondary (Persons 65 years and older) – R9 444
• Tertiary (Persons 75 years and older) – R3 145

Age Tax threshold

• Below age 65 – R95 750
• Age 65 to below 75 – R148 217
• Age 75 and above – R165 689

Click here to see our in-depth Tax Guide for the 2024/2025 tax year that begins on 1st March 2024.

The post 2024 Budget Speech Highlights appeared first on Dirmeik Consulting.

To know how this tax incentive will work in your 2024 income tax return, is to understand that it is actually a credit or rebate, that will be a deduction against your calculated tax liability.  The required elements of this is as follows:

• It is available in respect of a cost incurred only by a natural person (if the home is owned by a trust or company and the owner incurs the expenditure, the rebate is not available, but it will be available if the occupier incurs the cost).
• The cost must be incurred on the acquisition of new and unused solar photovoltaic panels that have a generation capacity of at least 275W each.
• The panels must be brought into use for the first time on or after 1 March 2023 and before 1 March 2024.
• The rebate is an amount equal to 25% of the cost of the panels, with a maximum rebate of R15 000.
• The panels must be installed and mounted on or affixed to a residence mainly used for domestic purposes by the individual incurring the cost.
• The installation must be connected to the distribution board of the residence and be issued with an electrical certificate of compliance.

What is needed to ensure your solar panel rebate is approved by SARS?

1. A VAT invoice reflecting the cost of the solar panels, separately from other items
2. The proof of payment of the above invoice
3. A Certificate of Compliance showing that the panels were brought into use for the first time during the period of 1 March 2023 to 29 February 2024

What happens if I sell my home?

You will not need to pay back the incentive. As the rebate only applies to fixed solar panels, the next person who moves into or uses the property will be able to produce their own power.

How do I claim if I live in a sectional title property?

Residents who live in sectional title properties and are allowed to install their own panels can claim in the same way as other homeowners. However, there are currently no provisions for reclaiming levies that are attributed to the cost of solar panels.

Can I claim the incentive if I rent my solar panels?

There is currently no provision for individuals who rent or lease solar panels to claim back any monies spent on covering this cost.

Solar Panel Incentives for Businesses

The initial Section 12B capital allowance provides for accelerated depreciation of 100% of the initial costs in the year the business started using the solar system.

From 1 March 2023, this incentive will increase to an accelerated depreciation allowance of 125%.

Therefore, a company that invests R150,000 in a solar system can deduct the following:

• VAT of 15% is reclaimable on the total installation charge (subject to a valid VAT invoice being issued by the supplier).
• Income tax saving of 27% for companies.
• If the R150,000 is VAT exclusive, the income tax savings will be R40,500.

If the claiming of this tax incentive seems confusing, why not let the experts at Dirmeik Consulting handle the intricacies to ensure that your claim is approved to the maximum benefit.  Contact us today for a consultation to see how we can best meet your tax and accounting needs.

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With official emigration having been phased out in 2021, SARS new tax clearance application processes for foreign investment and emigration allowances now treats all South African individuals the same, regardless of where they live.

This consolidated change is that the new ‘Approval of International Transfer (AIT)’ replaces both the previous ‘Emigration’ and ‘Foreign Investment Allowance (FIA)’ application types, which can conveniently still be applied for via e-Filing.  As part of the AIT, the following information will be required by SARS:

• Statements of assets and liabilities must be split between foreign and local
• Tax status (resident or non-resident)
• Are you a beneficiary of a trust (foreign or local)
• Do you have a shareholding (directly or indirectly) in any legal entity of 20% or more (foreign or local)
• Have you made a loan/s to a trust (local or foreign)

For more details on the supporting documents that will be needed, see SARS link here.

Previously, the FIA (R10 million limit) required the completion of a SARS FIA001 Form that would generate a TCS (Tax Compliance Status) PIN for foreign investment. Emigrants followed a similar process, but was issued a TCS PIN for emigration. This has now been consolidated into an enhanced single clearance process, namely the AIT, which aims to dramatically improve turnaround times for taxpayers, provided they are already compliant.

However, these changes only apply to the tax clearance process, with no changes being made on the Exchange Control side. The allowances applicable to South African resident individuals, as well as those who have ceased to be residents for tax purposes (emigrants) remain unchanged, and can be summarised as follows:

• The current R1 million Single Discretionary Allowance limit is still available yearly to all South African resident individuals, 18 years and older, who wish to transfer money abroad, and does not require a Tax Compliance PIN. However, this is only available to emigrants in the calendar year when they leave South Africa. Any further capital transfers for residents or emigrants above R1 million require tax clearance in terms of the AIT process.  For applications in excess of R10 million, SARB approval will be required.

In conclusion, this new process applies to new applications for foreign investment and emigration, and does not have any impact on tax clearances that have already been issued. Taxpayers are well advised that whilst SARS have made the process easier to apply, there is a strengthened and technology compliance enabled backend, which is best navigated through an experienced Tax Consultant, like ourselves. We, at Dirmeik Consulting can easily assist clients with this new tax clearance process, whether you are transferring or taking money abroad.  We are also able to successfully have you coded as a non-resident tax-payer with SARS, should you choose to emigrate.  Contact us today to find out how we can assist you.

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What is a VAT vendor?

You are a VAT vendor if your business is registered for VAT with the South African Revenue Service and you are required to pay VAT on any purchases you make and levy VAT on the sales of goods or services.

Should you not be registered but your turnover of taxable supplies is more than R1 million then you are obliged to register as a VAT vendor providing your supplies are not zero rated or exempt form VAT.

The VAT increase and how it affects VAT vendors

If your business is one where VAT is charged on your taxable supplies and VAT expenses are claimed as input tax, the change should be negligible. The main cost would be in administration where sales, accounting or POS systems would need to be updated to reflect the change as well as printing costs for price labels and lists, brochures, catalogs, etc.

There are a couple of areas where the VAT increase may come at more of a cost to your business:

• If you deal in exempt or non-taxable supplies, the additional VAT may be an extra cost to your business as you cannot claim it as input tax.
• If you have entered into an agreement prior to April 1st 2018 and there is a clause that you may not increase your price due to a VAT increase for the duration of the contract.

Areas where you would need more due diligence are:

• The receipt of invoices: If you receive an invoice where VAT has incorrectly been charged at 14%, you cannot claim 15% for input tax. This applies to tax invoices and point of sale receipts.
• The receipt of quotations: Ensure all quotations you receive are actually charging 15%, even if they state they may be charging 15%.

The VAT increase and non-VAT vendors

If you or your business is not registered for VAT, then unfortunately you still will not escape the VAT increase either. Expect to pay more tax on the majority of items including:

• Your municipal accounts
• Electronics
• Toiletries
• Groceries (except those that are zero rated such as rice, brown bread, dried beans, fresh fruit and vegetables, etc )
• Any contract you have entered into prior to April 1st 2018 including cellphone, short term insurance, gym, etc – unless there is an explicit clause that stops the payment being increased on a VAT increase
• And most other products or services charging VAT

The VAT increase can have far reaching effects depending on the type of business you are in. To consult with a tax professional, contact Dirmeik Consulting on:

Cape Town: 021 421 4444,
Johannesburg: 010 007 3026,
Durban: 031 007 0881

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To get you up to speed with the changes, we have put together the highlights that we feel may be of interest to you as an individual:

VAT increase

Value Added Tax will increase to a rate of 15%. This will take effect from April 1st 2018.

VAT has been steady at 14% since 1993 and the hike brings concerns about its impact on poor households. To limit this, there is a current zero-rating on basic foodstuffs that will remain in place. This covers rice, brown bread, and maize meal.

There will also be an above average increase in social grants for affected households.

Income tax – no inflation adjustment

There has been no inflation adjustment for the top four wealthiest tax brackets. This means that if you earn more than R410,461 per year, you will be taking home less pay.

The bottom three personal income tax brackets will be partially adjusted for inflation with a 3.1% increase. This also includes the primary, secondary and tertiary rebates.

Estate Duty hike

The rise in estate duty is being seen by some as a wealth tax. Estate duty has been a level 20% for all estates however with the latest change, estates above R30 million will be charged 25%.

Capital Gains / Dividend Taxes unchanged

Both capital gains tax and dividends tax will remain unchanged. The capital gains tax rate for individuals remains at 18% while the dividends tax rate holds at 20%.

Fuel Levy increases

After a 30c/litre hike last year, an increase of 52c/litre is on the cards. This consists of a 22c/litre increase in the general fuel levy and an increase of 30c/litre for the Road Accident Fund levy.

Luxury goods taxed more

Luxury goods will be receiving higher ad valorem tax rates. These items include cars, cosmetics, electronics and cell phones.

A lot of these products will see the tax rate rise from 7% to 9% while on cars, the maximum rate will be boosted from 25% to 30%.

Sin tax increase

With the increases for sin tax, you can expect to pay between 6% and 10% more for alcoholic products while smokers will have to fork out 8.5% more for tobacco products.

Sugar taxes

From April 1st 2018, a health promotion levy which taxes sugary beverages will be implemented. This aims to control the high obesity rate in South Africa by reducing sugar consumption. Sugary beverages with more than 4 grams of sugar per 100ml will be taxed 2.1c per gram of sugar per 100ml.

Carbon Taxes

The Carbon Tax Bill will be implemented from January 1 2019.

Social grant increases

The increases in social grants are detailed below:

• State old age grant increases from R1 600/month to R1 695.
• State old age grant for over 75s increases from R1 621 to R1 715.
• War veterans grant increases from R1 620 to R1 715.
• Disability grants increase from R 1 600 to R1 695.
• The foster care grant increases from R920 to R960.
• The child care dependency grant increases from R1 600 tot R1 695.
• The child support grant increases from R380 to R405.

Education

Funding has been put in place for fee-free higher education and training for poor students. New first-year students at universities and TVET colleges will be funded for the full cost of their study for the 2018 academic year if their family income is below R350 000 per annum.

Drought provisions

Government has allocated R6 billion to address the drought situation in the Western Cape, Eastern Cape and Northern Cape. This money will be used to augment water infrastructure with a special focus on Cape Town due to the concern of job losses in the agricultural sector.

Offshore investments

The prudential limits on offshore investments for funds under management by institutional investors is set to increase by five percentage points for all categories‚ including the allowance for investments in Africa.

There will be a rise on the limits for collective investment schemes‚ investment managers and long-term insurers of 40% from 35%; and for non-linked long-term insurers and retirement funds to 30% from 25%.

Unsure about how these changes may affect you or your business? Contact Dirmeik Consulting on:

Cape Town: 021 421 4444,
Johannesburg: 010 007 3026,
Durban: 031 007 0881

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Most of us know that VAT stands for Value Added Tax and is currently levied at the standard rate of 14% in South Africa, but what exactly is this system and why is it in place? These are some of the questions we will review in this article to provide a better understanding of the Value Added Tax system.

In 1991, the government made the decision to switch to a broad-based, low rate tax system in the form of VAT in order to help raise additional revenue. VAT is an indirect tax on the consumption of goods and services and is proportional to the price charged for goods and services.

How does VAT work?

In order for the government to raise additional revenue, certain businesses are required to charge VAT on their taxable supply of goods and services. If a business’s sales of taxable goods or services exceed R1 million per annum, that business must register for VAT. (A business may elect to register if the business’s sales of taxable supplies is more than R50 000 per annum).

Once a business is registered for VAT, that business becomes a vendor and acts as an agent on behalf of the government to collect tax.

As VAT is charged at each stage of the production and distribution chain, we can use a classic example to illustrate this involving a farmer, a baker, a grocery store, and you, the customer:

Jan – the farmer – grows wheat on his farm and sells it to Ted – the baker.

Jan charges Ted a price of R0.57 for the wheat inclusive of 14% VAT. Jan had added 14% (R0.07) to his price of R0.50 to make a VAT inclusive price of R0.57. After the sale, Jan pays the R0.07 to the government (SARS).

Ted – the baker – bakes a loaf of bread and sells it to Thando – the owner of the grocery store. Ted charges Thando R4.56 inclusive of VAT for the loaf of bread. Ted’s price of R4.00 has VAT of 14% added onto it making it a total of R4.56. After the sale, Ted pays SARS R0.49 (R0.56 VAT that Ted charged Thando minus R0.07 credit that Ted paid Jan).

Thando sells the loaf of bread to you for R11.40 inclusive of VAT. Thando’s price of R10 has 14% VAT included to make it a total R11.40. Thando then pays SARS R0.84 (R1.40 VAT that Thando charged you minus the R0.56 VAT Thando paid Ted).

In summary, the government has collected R0.07 from Jan the farmer, R0.49 from Ted the baker, and R0.84 from Thando the grocery store owner. That’s a total of R1.40 on a sale of R11.40 or 14% of the final sale’s price.

An advantage of VAT

We all need to pay our taxes to keep our country as prosperous as possible. However, tax systems like retail sales tax allows unethical companies to easily avoid tax. The beauty of the VAT system is that there is a clever counter-mechanism in place.

At each stage of the production or distribution process, a record is being kept by, for example, the farmer, the baker and the grocery store. Should Ted – the baker – decide not to pay VAT, the records of the farmer and the grocery store owner will pinpoint the baker as not having paid his taxes.

Looking for more on VAT?

If you would like to find out more about Value Added Tax, view one of our other VAT related articles:

VAT vendors and submitting VAT
VAT overview
Who needs to register for VAT?

Do you need assistance with VAT?

Contact us today for professional, reliable and friendly VAT related services.
Cape Town: 021 421 4444,
Johannesburg: 010 007 3026,
Durban: 031 007 0881

The post What is VAT? appeared first on Dirmeik Consulting.

Retirement structure is based on three legs, namely exempt, exempt, and taxed. While saving for your retirement you are on the first ‘exempt’ leg where, as described above, you can deduct any retirement contributions being paid into a tax-incentivised retirement product from your taxable income – up to a certain limit.

While your investment grows, the second ‘exempt’ leg frees you from paying Capital Gains Tax, dividends withholding tax or income tax on the growth.

However, when you elect to retire, you enter the third leg which is ‘taxed’. This article will explain how tax is applied to retirement vehicles such as pension funds, pension preservation funds and/or retirement annuities.

Tax upon retirement

If you have been contributing to a pension fund, pension preservation fund or retirement fund, you are entitled to make a lump sum withdrawal on retirement.

The maximum amount that you are allowed to withdraw is equal to one-third of the retirement interest in your fund. If the total value of your fund is less than R247 500, then you are permitted to withdraw the full retirement interest amount as a lump sum.

Any lump sum that is withdrawn is subject to taxation:

After a one-third lump sum withdrawal, the remaining two-thirds of retirement interest is received by way of regular pension (annuity). This would be in the form of a monthly amount that you received from the annuity. If this monthly amount exceeds the tax threshold, you are liable to pay tax on the amount that is over the threshold limits which are:

For the 1 March 2017 to 28 February 2018 year of assessment for the tax season starting during 2018:
o Person below 65 – R75 750 per annum
o Person 65 and above but not yet 75 – R117 300
Person 75 and above – R131 150.

Retirement tax breaks

Despite being liable for tax on retirement, there are still tax breaks which you can enjoy as a pensioner:

• At retirement, you can withdraw up to R500 000 tax-free from your retirement savings
• While income from a retirement annuity is charged under income tax, the marginal tax rate that you are charged by SARS is usually lower than the rate you are charged while working.
• Any growth in your living annuity portfolio retirement is free from income tax, dividends withholding tax and Capital Gains Tax.
• There are tax rebates that apply to you as a pensioner in addition to the primary rebate that applies to all taxpayers.
• As a tax payer over 65, you are subject to medical tax credits which act as an additional rebate.

Should you have questions on these tax breaks or wish to consult with a knowledgeable tax consultant regarding tax and retirement, contact Dirmeik Consulting on:

Cape Town: 021 421 4444,
Johannesburg: 010 007 3026,
Durban: 031 007 0881

The post Tax considerations on retirement appeared first on Dirmeik Consulting.

Whilst stoically saving your hard earned money for the golden years is commendable, legislation is constantly changing and your retirement contributions should be adapting to these changes. In past years, retirement funds such as provident funds, retirement annuities and pension funds all had their own set of tax deductions and limitations. As of 1 March 2016 however, all types of retirement funds are now treated the same with regards to tax and may also provide you with significant opportunities to save on tax.

Instead of having to factor in different rules if you had a mix of retirement investments, and in an effort to encourage retirement savings, the new system now allows you to save up to 27.5% of your taxable income when making retirement contributions.

How to maximise your tax saving

Many underestimate their financial requirements at retirement age and fail to save enough to live comfortably or are forced to continue working. The new system SARS has implemented has been setup in such a way that the more you save for retirement, the less tax you will pay. This means that potentially your taxable income can be reduced by over a quarter (27.5%), reducing your tax liability and resulting in a smaller tax payment. It is important to note that there is a ceiling of R350 000 that can be allocated to retirement contributions per year.

Let’s look at an example: Imagine you are earning a total taxable income of R40 000 per month (R480 000 per annum). Over the last few years you had setup a recurring payment of R2000 per month (R24 000 per annum) for your retirement fund. This means that under the new system you are only making use of a 5% deduction to your total taxable income when 27.5% is available for use. i.e. R480 000 – R24 000 = R456 000. This positions you in a tax bracket for R456 000.

With the new system, you could utilize the full 27.5% and pay as much as R11 000 per month into your retirement fund. With a monthly payment of R11 000 per month, your annual taxable income would reduce to a much lower R348 000, placing you in a lower tax bracket. This means that a good portion of money that you would be paying on tax would effectively be going into your own retirement savings, making this system a great incentive to save more for your retirement.

If you need to speak to a tax professional, call Dirmeik Consulting on:
Cape Town: 021 421 4444,
Johannesburg: 010 007 3026,
Durban: 031 007 0881

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