Yet whilst the adjustment of income tax brackets will see some consumers pocketing marginally more come month-end, increased fuel levies and rises in sin taxes look set to make 2013 a costly year for many South Africans. Taxpayers should exercise caution when budgeting for the forthcoming financial year.
While many consumers will end up paying a smaller percentage of their monthly salaries to the tax man, there are a number of other factors that are likely to put an even greater strain on disposable income levels. For instance, while individuals earning R200 000 per annum will owe R1032 less in taxes over the course of the year, they'll need to take into consideration the impact of a significant increase in fuel levies and a raise in so-called "sin taxes" of between 5.5 and 10%.
The general fuel levy will rise by 15% on 3 April to R2.13/l. This, combined with an 8c/l Road Accident Fund levy, rising oil costs and a weakening rand, could end up having an enormous impact on consumers' expenses.
The rapidly increasing price of fuel is likely to hit consumers' pockets hard and will severely diminish the impact of any proposed income tax relief. Additional taxation on alcohol and cigarettes, as well as rising electricity costs, will further contract these income tax gains, meaning that consumers are, in fact, likely to experience greater financial strain over the course of the forthcoming financial year.
Another significant development addressed in Minister Gordhan's speech is a new tax set to be applied to trusts, which could severely curtail the benefits currently enjoyed by trustees and beneficiaries.
It is now even more important for trust owners to ensure that their trust deeds are up to date and that they follow correct procedural guidelines.
Under the new proposed trust tax initiative, any beneficiary distributions that are claimed as deductible in the trust will be taxed as ordinary revenue in the hands of the beneficiary. What this means is that any type of distributed income stream from which beneficiaries previously derived benefit will now fall away, and be subject to current income tax legislation.
Trusts, which are often used to protect and manage assets, will now find themselves under increased scrutiny and the onus is on trust owners to ensure that they follow protocol, something that includes holding annual meetings with all trustees present. Trust owners and beneficiaries would be well advised to consult a financial advisor in order to ensure compliance.
