BUDGET REVIEW: Budget Impact on High Net Worth Individuals
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These include the 15% dividend tax, an unexpected 50% increase from the expected rate, capital gains made will be subject to an increased inclusion rate resulting in the increase of the effective tax rate from 10% to 13.3%, and the proposed taxation on luxury goods.
Furthermore, the annual interest exemption will be phased out to make space for tax preferred savings- and investment accounts.
Budget Impacts Individual Pension Funds
For those working and seeking to accumulate pensions for their retirement, the introduction of pension capping will come as a serious blow. Although the tax deductible limit has increased to 22,5%, the annual tax deductible retirement contribution will be limited to R250,000 per annum for individuals under the age of 45 and R300,000 per annum for individuals over the age of 45. For those who left retirement funding until their later years of employment (as prior to this they could not afford significant contributions), the effect of taxation of the contributions to the pension fund, will leave those short of their intended capital or income requirements on retirement.
Budget Review Â– Room for Improvement
The budget review indicates that there is room for improvement on the compliance of high net-worth individuals and this will be a focus area for the South African Revenue Service (SARS) in the coming year.
Clearly, high-net worth individuals will make a greater contribution to the fiscus, and can expect greater scrutiny and audits of their personal tax affairs from this budget.
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