2015 Budget & its Influence on South African Property Market

2015 Budget & its Influence on South African Property Market

2015 Budget & its Influence on South African Property Market

Minister of Finance, Nhlanhla Nene, delivered the National Treasury’s budget for 2015/2016 on 25 February.

From a property transaction perspective, there has been considerable change as:

• The transfer duty threshold has been increased to R750,000 but so too has the transfer duty rates in the applicable bands with the highest rate up to 11% (8% in 2014).
• The CGT (Capital Gains Tax) inclusion rates for individuals, special trusts as well as ordinary trusts have increased nominally.

The most positive stimulus for the real estate market will be the upward shift in the transfer duty threshold, from R600 000 currently to R750 000.  This means that the already strained working and middle class income earners will not have to pay any tax on second-hand properties that cost less than R750 000, and that will enable many more first-time buyers to get on to the property ladder, with positive consequences for the market as a whole.

The new rates eliminate transfer duty on properties below R750 000, while the rate on properties above R2.25 million will increase from R37 000 + 8% of the value of the home above R1,6 million to R85 000 + 11% of the value of the property above R2,25 million.

The purpose of the adjustments to the transfer duty rates, according the Minister, is to benefit middle-income households.

It effectively means an increase in transfer duties on property transactions above R2.3 million and a decrease in transfer on property transactions between R750 000 and R2.3 million.

The changes equates to a decrease of R4 500 in transfer duty for a property of R750 000

• decrease from R6 000 on a R800 000 property to R1 500
• from R12 000 on the purchase of a R1 million property to R7 500
• R37 000 on R1,5 million to R34 500
• R77 000 on R2 million to R65 000
• from R97 000 to R95 000 on R2,25 million

and an increase in transfer duty:

• from R157 000 to R167 500 on a property of R3 million
• from R237 000 to R277 500 on a property of R4 million
• from R317 000 to R387 500 on a property of R5 million
• from R717 00 to R937 500 on a property of R10 million

The new rates will only apply to property acquired on or after 1 March 2015 by any person, including companies, close corporations and trusts. 

In summary, the following was announced in the Budget:

TRANSFER DUTY

The new rates 

Value of property (R) Rate

0 – 750 000 - 0%

750 001 – 1 250 000 - 3% of the value above R750 000

1 250 001 – 1 750 000 - R15 000 + 6% of the value above R1 250 000

 1 750 001 – 2 250 000 - R45 000 + 8% of the value above R1 750 000

2 250 001 and above - R85 000 + 11% of the value above R2 250 000

The previous rate, up until 28 February 2015

Value of property (R) Rate 0 – 600 000 - 0%

600 001 – 1 000 000 - 3% of the value above R600 000

1 000 001 – 1 500 000 - R12 000 + 5% of the value above R 1000 000

1 500 001 and above - R37 000 + 8% of the value exceeding R1 500 000

Capital Gains Tax (CGT) RATES

The new inclusion rate is:

Individuals and special trusts - 13,65% (This is up from 13.3%)

Companies – 18,65%. (This is up from 18,6%).

Other trusts – 27,31%. (This is up from 26,6%)

 INDIVIDUAL TAX THRESHOLD INCREASE

With regard to the individual income tax threshold, the entry level has increased from R70,700 to R73,650 which ought to provide some relief to those affected.

2015/2016

Taxable Income (R) Rate of Tax (R)

0 – 181 900 - 18% of taxable income

181 901 – 284 100 - 32 742 + 26% of taxable income above 181 900

284 101 – 393 200 - 59 314 + 31% of taxable income above 284 100

The previous rate, up until 28 February 2015

Taxable Income (R) Rate of Tax (R)

0 – 174 550 - 18% of taxable income

174 551 – 272 700 - 31 419 + 25% of taxable income above 174 550

272 701 – 377 450 - 55 957 + 30% of taxable income above 272 700

377 451 – 528 000 - 87 382 + 35% of taxable income above 377 450

528 001 – 673 100 - 140 074 + 38% of taxable income above 528 000

673 101 and above - 195 212 + 40% of taxable income above 673 100

General

• The general fuel levy increases by 30.5 cents per litre and the Road Accident Fund levy increases by 50 cents per litre on 1 April 2015.
• With regard to the individual income tax threshold, the entry level has increased from R70,700 to R73,650 which ought to provide some relief to those affected.
• Personal income tax rates have been increased by 1% for all taxpayers earning in excess of R181,901 p/a.
• SARS again increased the rate of interest charged on moneys due to it by 0,25%.
• Donations tax is still levied at 20%, subject to exclusions between spouses and between SA group companies.
• VAT remains at 14%, welcome amidst market fears that this would be increased.
• Estate duty remained unchanged.

Source  - SAnews.gov.za