On 24 February 2021, Finance Minister Tito Mboweni delivered his annual Budget speech. During a time when rising debt levels and decreased revenue collection has been a concern, the budget presented was more hopeful than expected with tax increases kept to a minimum. Prioritised on the fiscal agenda is the mass roll-out of the COVID-19 vaccines in the coming year.

Highlighted below are some of the key aspects of the 2021 budget that may be applicable to members:

An above-inflation increase of 5% in the personal income tax brackets and rebates is expected to provide relief of R2.2 billion. Below is the tax table applicable for the ensuing year of assessment:

Tax thresholds

The tax-free thresholds for personal income taxes were increased as follows: 

• R 87,300 for taxpayers younger than 65
• R 135,150 for taxpayers age 65 to 74
• R 151,100 for taxpayers age 75 and over 

Rebates

The primary, secondary and tertiary rebates (deductible from tax payable) were increased to the following: 

• R 15,714 per year for all individuals
• R 8,613 for taxpayers age 65 and over
• R 2,871 for taxpayers age 75 and over

Medical tax credits

The tax credit for the first two dependants increased to R332, and for additional dependants it increased to R224. It is still the intention that when the National Health Insurance plan is rolled out, these tax credits will be cancelled.

Corporate taxes

The corporate income tax rate will be lowered to 27% for companies with years of assessment commencing on or after 1 April 2022.

Unemployment Insurance Fund

The Unemployment Insurance Fund (UIF) ceiling has increased to R 17,711.58 per month from 1 March 2021.

Fuel levy

With effect from 7 April 2021, there will be an inflation-linked general fuel levy increase of 15 cents per litre for petrol and diesel, and an above-inflation increase of 11 cents per litre in the Road Accident Fund levy. The carbon tax rate will increase by 1c to 8c per litre for petrol, and 9c per litre for diesel, also from 7 April 2021.

Retirement and Provident Fund Changes

Subject to the protection of certain vested commutation rights, it was announced that annuitisation for provident funds takes effect from 1 March 2021, and provident fund members will continue to enjoy a tax deduction on their contributions. Refer to the Newsletter article on Legislative Changes to Provident Funds.

No changes were made to the lump sum rates upon withdrawal or retirement.

Taxpayers will be able to deduct contributions to any retirement fund up to a maximum of 27.5% of the greater of remuneration for PAYE purposes or taxable income (both excluding retirement fund lump sums and severance benefits). The deduction is capped at R 350,000.

From 1 March 2021, taxpayers that emigrate will no longer be required to go through a formal emigration process to access their retirement annuities. Taxpayers will only need to prove that they have been non-resident for longer than three years to access their funds.

The minimum value for paid-up retirement annuities will increase from R 7,000 to R 15,000 from 1 March 2021.

Changes to Regulation 28

Changes to Regulation 28 of the Pension Funds Act will be published by National Treasury. The intention of the changes is to make it easier for retirement funds to invest in infrastructure projects.

The COVID-19 pandemic has greatly aggravated the country’s financial situation. Minister Mboweni acknowledged that it was imperative for government to overcome the spread of the pandemic, to take control of the debt crisis and to grow the economy. The Minister called on us to remain calm and not become despondent in these trying times, to “continue to see that there is light despite all of the darkness.”

Aneesa Khan | Finance Manager