South African Budget 2017 - Personal income tax

Publication Feb 22, 2017

Tax rates

A new top personal income tax bracket of 45% for taxable incomes above R1.5 million per year has been introduced.

The primary, secondary and tertiary rebates and all the taxable income brackets will be increased by 1% from 1 March 2017. The new tax brackets are illustrated below:

2016 / 2017

2017 / 2018

Taxable income (R)

Rates of tax

Taxable income (R)

Rates of tax

R0 - R188 000

18% of each R1

R0 - R189 880

18% of each R1

R188 001 – R293 600

R33 840 + 26% of the amount above R188 000

R189 881 – R296 540

R34 178 + 26% of the amount above R189 880

R293 601 – R406 400

R61 296 + 31% of the amount above R293 600

R296 541 – R410 460

R61 910 + 31% of the amount above R296 540

R406 401 – R550 100

R96 264 + 36% of the amount above R406 400

R410 461 – R555 600

R97 225 + 36% of the amount above R410 460

R550 101 – R701 300

R147 996 + 39% of the amount above R550 100

R555 601 – R708 310

R149 475 + 39% of the amount above R555 600

R701 301 and above

R206 964 + 41% of the amount above R701 300

R708 311 – R1 500 000

R209 032 + 41% of the amount above R708 310

 

 

R1 500 001 and above

R533 625 + 45% of the amount above R1 500 000

Rebates:2016/2017Rebates:2017/2018
Primary R13 500 Primary R13 635
Secondary R7 407 Secondary R7 479
Third R2 466 Third R2 493
Tax threshold:2016/2017Tax threshold:2017/2018
Below age 65 R75 000 Below age 65 R75 750
Age 65 and over R116 150 Age 65 and over R117 300
Age 75 and over R129 850 Age 75 and over R131 150

Foreign employment income tax exemption for South African residents

The exemption on foreign employment income derived by a resident who works in a foreign country for more than 183 days will be amended so that foreign employment income will only be exempt from tax in South Africa if the employment income is subject to tax in the foreign country.

Trust and tax anti-avoidance measures

Section 7C of the Income Tax Act was introduced in 2016 as an anti-avoidance measure against the use of low-interest or interest-free loans to trusts. Currently, section 7C of the Income Tax Act applies to any loan, advance or credit that is provided to a trust by a connected person who is –

  • a natural person; or

  • a connected person in relation to a natural person.

It is proposed that the scope of this anti-avoidance measure be extended to cover avoidance schemes where the loan is advanced to companies owned by a trust. The anti-avoidance rule will not apply to trusts that are not used for estate planning, for example, employee share scheme trusts and some trading trusts.

Share incentive schemes

Section 8C of the Income Tax Act has been tweaked almost every year since its introduction. In 2016, new rules were introduced to regulate dividends paid to employees who participate in share-based incentive schemes.  However, these rules did not elegantly tie into the capital gains tax provisions arising from the vesting or disposal of a restricted equity instrument.  The interaction between these regimes will be clarified. 

Employer-provided bursaries

In relation to bursaries, the following increases to the thresholds are proposed –

  • income eligibility threshold for employees from R400 000 to R600 000;

  • the monetary limits for bursaries from R15 000 to R20 000 for education below NQF level 7; and

  • the monetary limits for bursaries from R40 000 to R60 000 for qualifications at NQF level 7 and above.

Medical tax credit

The medical tax credit will be increased–

  • for the first two beneficiaries from R286 to R303 per month; and

  • for the remaining beneficiaries from R192 to R204 per month.

Tax-free savings accounts

The tax-free savings accounts annual allowance of R30 000 will be increased to R33 000.


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