2017/18 Budget Address - Highlights Which Are Of Significance To South African Property Market
The Minister Of Finance Delivered His 2017/2018 Budget Address And The Following Highlights Are Of Significance For The Property Market
Transfer Duty:
The raising of the Transfer Duty threshold on home purchases from R750 000 to R900 000 will reduce the transaction costs for buyers at this level by about R4 500.
This will undoubtedly benefit especially first time home buyers who do not have equity in an existing property that they can use as part of a deposit or help paying the other transaction fees. By lowering the transaction costs (no transfer duty payable on property priced up to R900 000), government is clearly trying to promote new home ownership.
Transfer duty is payable at the following rates on transactions that are not subject to VAT.
Acquisition of property by all persons:
Value of property (R) Rate
0 – 900 000 0%
900 001 – 1 250 000 3% of the value above R900 000
1 250 001 – 1 750 000 R10 500 + 6% of the value above R 1 250 000
1 750 001 – 2 250 000 R40 500 + 8% of the value above R 1 750 000
2 250 001 – 10 000 000 R80 500 +11% of the value above R2 250 000
10 000 001 and above R933 000 + 13% of the value above R10 000 000
Estate Duty:
Estate duty is levied at a flat rate of 20% on property of residents and South African property of non-residents.
A basic deduction of R3.5 million is allowed in the determination of an estate’s liability for estate duty as well as deductions for liabilities, bequests to public benefit.
Donations Tax:
• Donations tax is levied at a flat rate of 20% on the value of property donated.
• The first R100 000 of property donated in each year by a natural person is exempt from donations tax.
• In the case of a taxpayer that is not a natural person, the exempt donations are limited to casual gifts not exceeding R10 000 per annum in total.
• Dispositions between spouses and South African group companies and donations to certain public benefit organisations are exempt from donations tax.
Disposal of immovable property:
A provisional tax is withheld on behalf of non-resident sellers of immovable property in South Africa to be set off against the normal tax liability of the non-residents.
The tax to be withheld from payments to the non-residents is at a rate of 7.5% for a non-resident individual, 10% for a non-resident company and 15% for a non-resident trust that is selling the immovable property - i.e up from respectively 5%, 7.5% and 10%.
Other significant announcements + more general tax amendments which stood out:
• Super Tax Bracket (Individuals) – 45% on income above R1,500,000 p.a.
• Trust Tax Rate increased to 45% (from 41%)
• Increase to Effective rate of Capital Gains tax for Trusts / Super Tax Bracket
• Dividends Tax increased to 20% (from 15%)
• No increases in VAT or Capital Gains Tax
• Taxes on fuel to rise by 39c a litre. (Fuel levy +30c and RAF levy +9c)
Total fuel levy on petrol will amount to 36% of pump price
Total fuel levy on diesel will amount 40.2% of pump price
• Sugar tax: Will be implemented once parliament passes legislation
A new bracket of “Super Tax” has been introduced on personal income that levies tax at 45% on income exceeding R1,500,000 per annum. This increases the effective rate on capital gains above this level to 18% (from 16.4%). An estimated 1.4% or roughly 103 300 registered taxpaying individual taxpayers will fall into this category during the 2017/18 tax year accounting for about 26% of the overall income tax payable - adding R4,4 billion tax revenue. The previous top bracket of 41% was set at R701 301.
The increase in the Trust tax rate to 45% increases the effective rate of CGT for trusts to 36% (from 32.8%).
The biggest share of the R28 billion budgeted additional tax revenue income will however come from the partial relief for inflation (adding R12,1 bilion). The tax bracket creep which were not adjusted means that people will, in real terms, be paying more tax on the same income.