R13.5bn in tax relief on the cards

first_imgHe said that in order to improve the equity of the income tax system and broaden the tax base, the treatment of travel allowances would be reformed. This meant that the “deemed kilometre method” for deducting travel expenses would be repealed with effect from 1 March. “For pre-retirement lump sum withdrawals from retirement savings, the first R22 500 will be tax-free,” he said. “This concession will allow taxpayers significant tax relief in instances where circumstances beyond their control force them to make use of their retirement savings due to involuntary unemployment,” he said. Gordhan said the draft laws contain the tax proposals announced in the February 2009 Budget Speech by previous finance minister Trevor Manuel, and elaborated on in the 2009 Budget Review. Gordhan said that, given concerns about the plight of workers losing jobs in the economic crisis, the draft laws propose that withdrawal from retirement funds on retrenchment will qualify for the R300 000 exemption. Gordhan said other important amendments related to the taxation of lump sum withdrawals from retirement savings before retirement and on retrenchment, especially in the current economic environment. “A significant simplification of the tax treatment of lump-sum payments from retirement savings upon retirement, and pre-retirement lump sum withdrawals, will be implemented as from this year. “For individuals, the most important amendment was the adjustment to the personal income tax thresholds, which resulted in tax relief for individuals estimated at R13.5-billion,” he said. 2 September 2009 “This amendment will eliminate an unintended subsidy for commuting by car,” he said.center_img Retrenchment In addition, and to limit potential abuse, all lump-sum withdrawals and payments will be aggregated over the life of the taxpayer, meaning that once the tax-free portion has been used, it cannot be used again; subsequent lump sums will be taxed at higher marginal rates. Source: BuaNews For technical reasons, he said, the amendments are split into two Bills – a money Bill (under section 77 of the Constitution) and an ordinary (or section 75) Bill. The 2009 Taxation Law Amendment Bills will result in South Africans receiving tax relief of R13.5-billion, Finance Minister Pravin Gordhan said in Pretoria this week. The marginal tax rates on larger lump sums range from 18% to 36% for lump sums in excess of R900 000. In the case of a lump sum upon retirement, the first R300 000 is tax-free, and the marginal tax rates also range from 18% to 36% for lump sums above R900 000. Retirement savings Gordhan said that, in a bid to encourage people to preserve their retirement savings for the time they actually retire, the law provides for a more generous tax-free amount upon retirement.last_img

Leave a Reply

Your email address will not be published. Required fields are marked *